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Preferences and biases in educational choices and labor market expectations: shrinking the black box of gender

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  • Reuben, Ernesto
  • Wiswall, Matthew
  • Zafar, Basit

    (Federal Reserve Bank of New York)

Abstract

Standard observed characteristics explain only part of the differences between men and women in education choices and labor market trajectories. Using an experiment to derive students' levels of overconfidence, and preferences for competitiveness and risk, this paper investigates whether these behavioral biases and preferences explain gender differences in college major choices and expected future earnings. In a sample of high-ability undergraduates, we find that competitiveness and overconfidence, but not risk aversion, are systematically related with expectations about future earnings: Individuals who are overconfident and overly competitive have significantly higher earnings expectations. Moreover, gender differences in overconfidence and competitiveness explain about 18 percent of the gender gap in earnings expectations. These experimental measures explain as much of the gender gap in earnings expectations as a rich set of control variables, including test scores and family background, and they are poorly proxied by these same control variables, underscoring that they represent independent variation. While expected earnings are related to college major choices, the experimental measures are not related with college major choice.

Suggested Citation

  • Reuben, Ernesto & Wiswall, Matthew & Zafar, Basit, 2013. "Preferences and biases in educational choices and labor market expectations: shrinking the black box of gender," Staff Reports 627, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednsr:627
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Luc Bridet & Margaret Leighton, 2015. "The Major Decision: Labor Market Implications of the Timing of Specialization in College," Discussion Paper Series, Department of Economics 201510, Department of Economics, University of St. Andrews.
    2. Peter Arcidiacono & V. Joseph Hotz & Arnaud Maurel & Teresa Romano, 2014. "Recovering Ex Ante Returns and Preferences for Occupations using Subjective Expectations Data," NBER Working Papers 20626, National Bureau of Economic Research, Inc.
    3. Lars Kirkebøen & Edwin Leuven & Magne Mogstad, 2014. "Field of Study, Earnings, and Self-Selection," NBER Working Papers 20816, National Bureau of Economic Research, Inc.
    4. Francesconi, Marco & Parey, Matthias, 2018. "Early Gender Gaps Among University Graduates," CEPR Discussion Papers 12754, C.E.P.R. Discussion Papers.
    5. Joanna Tyrowicz & Lucas van der Velde & Irene van Staveren, 2018. "Identifying Age Penalty in Women's Wages: New Method and Evidence from Germany 1984-2014," IAAEU Discussion Papers 201803, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    6. Attanasio, Orazio P. & Kaufmann, Katja M., 2014. "Education choices and returns to schooling: Mothers' and youths' subjective expectations and their role by gender," Journal of Development Economics, Elsevier, vol. 109(C), pages 203-216.
    7. Francesco Bogliacino & Iván González-Gallo, 2015. "Aspirations, Prospect Theory and entrepreneurship: evidence from Colombia," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 62(3), pages 271-290, September.
    8. Thomas Buser & Anna Dreber & Johanna Mollerstrom, 2015. "Stress Reactions cannot explain the Gender Gap in Willingness to compete," Tinbergen Institute Discussion Papers 15-059/I, Tinbergen Institute.
    9. Joanna Tyrowicz & Lucas van der Velde & Irene van Staveren, 2017. "Identifying Age Penalty in Women's Wages: New Method and Evidence from Germany 1984-2014," SOEPpapers on Multidisciplinary Panel Data Research 956, DIW Berlin, The German Socio-Economic Panel (SOEP).
    10. Aurelie Dariel & Curtis Kephart & Nikos Nikiforakis & Christina Zenker, 2017. "Emirati women do not shy away from competition: evidence from a patriarchal society in transition," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 3(2), pages 121-136, December.
    11. Buser, Thomas & Geijtenbeek, Lydia & Plug, Erik, 2015. "Do Gays Shy Away from Competition? Do Lesbians Compete Too Much?," IZA Discussion Papers 9382, Institute for the Study of Labor (IZA).
    12. Koch, Alexander & Nafziger, Julia & Nielsen, Helena Skyt, 2015. "Behavioral economics of education," Journal of Economic Behavior & Organization, Elsevier, vol. 115(C), pages 3-17.
    13. Lergetporer, Philipp & Werner, Katharina & Woessmann, Ludger, 2018. "Does Ignorance of Economic Returns and Costs Explain the Educational Aspiration Gap? Evidence From Representative Survey Experiments," Rationality and Competition Discussion Paper Series 91, CRC TRR 190 Rationality and Competition.
    14. Jordi Brandts & Klarita Gërxhani & Arthur Schram, 2015. "Status Ranking: A Hidden Channel to Gender Inequality under Competition," Working Papers 817, Barcelona Graduate School of Economics.

    More about this item

    Keywords

    college majors; earnings; gender differences; subjective expectations; risk aversion; overconfidence; competitiveness;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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