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The choice of major: effects on wages and an evaluatio of the no-switching majors rule

  • Daniel dos Santos
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    I estimate a dynamic discrete choice model of the decision of going to college in a speci?c major. Dynamics in the model result from a correlated bayesian learning structure about individual comparative advantages in the labor mar- ket, which allows me to decompose the income gains associated to college ed- ucation into three components: (i) human capital accumulation, (ii) access to specialized segments of the labor market, and (iii) better exploration of com- parative advantages due to the use of information acquired in college. The estimation suggests scienti?c majors are especially bene?tted from (ii) whereas in non-scienti?c occupations the e¤ect (i) dominates. I then use the estimated structural parameters to simulate the impact of restrictions to changes of major during college, a policy commonly found outside North America. The results suggest that if American students were not allowed to switch majors, they would have welfare losses equivalent to their ?rst year of labor income after college.

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    Paper provided by Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto in its series Working Papers with number 09_06.

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    Handle: RePEc:fea:wpaper:09_06
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    1. Willis, Robert J & Rosen, Sherwin, 1979. "Education and Self-Selection," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S7-36, October.
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    8. Susumu Imai & Neelam Jain & Andrew Ching, 2009. "Bayesian Estimation of Dynamic Discrete Choice Models," Econometrica, Econometric Society, vol. 77(6), pages 1865-1899, November.
    9. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
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    12. Arcidiacono, Peter, 2002. "Ability Sorting and the Returns to College Major," Working Papers 02-26, Duke University, Department of Economics.
    13. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
    14. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
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    17. Stephen V. Cameron & James J. Heckman, 2001. "The Dynamics of Educational Attainment for Black, Hispanic, and White Males," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 455-499, June.
    18. Andriy Norets, 2009. "Inference in Dynamic Discrete Choice Models With Serially orrelated Unobserved State Variables," Econometrica, Econometric Society, vol. 77(5), pages 1665-1682, 09.
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