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The Effect of Changes in the Skill Premium on College Degree Attainment and the Choice of Major

Author

Listed:
  • Ran Abramitzky
  • Victor Lavy
  • Maayan Segev

Abstract

We study the impact of financial incentives on higher education decisions and the choice of major. We rely on a reform whereby Israeli kibbutzim shifted from their traditional policy of equal sharing to productivity-based wages, using for identification the staggered implementation of this reform. In this setting of very low initial returns to education, we find that the dramatic increase in the rate of return and its sharp variation across fields of study led to a large increase in the probability of receiving a bachelor’s degree, especially in STEM fields of study that are expected to yield higher financial returns.

Suggested Citation

  • Ran Abramitzky & Victor Lavy & Maayan Segev, 2024. "The Effect of Changes in the Skill Premium on College Degree Attainment and the Choice of Major," Journal of Labor Economics, University of Chicago Press, vol. 42(1), pages 245-288.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/722565
    DOI: 10.1086/722565
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    Cited by:

    1. Maria A. Cattaneo & Christian Gschwendt & Stefan C. Wolter, 2025. "The Value of a Degree," Economics of Education Working Paper Series 0247, University of Zurich, Department of Business Administration (IBW).
    2. Ganguli, Ina & Haidar, Jamal Ibrahim & Khwaja, Asim Ijaz & Stemper, Samuel & Zafar, Basit, 2024. "Economic shocks and skill acquisition: Evidence from a national online learning platform at the onset of COVID-19," Labour Economics, Elsevier, vol. 90(C).
    3. Joseph G. Altonji & John Eric Humphries & Yagmur Yuksel & Ling Zhong, 2025. "Decomposing Trends in the Gender Gap for Highly Educated Workers," NBER Working Papers 34133, National Bureau of Economic Research, Inc.
    4. Chesney, Alexander J., 2025. "Failing to Finish: The role of employer effects on advanced education attainment," Economics of Education Review, Elsevier, vol. 106(C).
    5. Yuanyuan Chen & Jiaxin Wang & Meng Yuan, 2025. "Tiger moms: mother’s education and investments in children’s human capital in China," Journal of Population Economics, Springer;European Society for Population Economics, vol. 38(4), pages 1-33, December.
    6. Katja Maria Kaufmann & Mark Jeffrey Spils, 2024. "The Long-Run Effects of STEM-Hours in High School: Evidence From Dutch Administrative Data," CRC TR 224 Discussion Paper Series crctr224_2024_536, University of Bonn and University of Mannheim, Germany.
    7. Arpita Patnaik & Matthew J. Wiswall & Basit Zafar, 2020. "College Majors," NBER Working Papers 27645, National Bureau of Economic Research, Inc.
    8. Rodrigo Adão & Martin Beraja & Nitya Pandalai-Nayar, 2020. "Technological Transitions with Skill Heterogeneity Across Generations," NBER Working Papers 26625, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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