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Preferences and Biases in Educational Choices and Labor Market Expectations: Shrinking the Black Box of Gender

Author Info

Listed author(s):
  • Reuben, Ernesto

    ()

    (New York University, Abu Dhabi)

  • Wiswall, Matthew

    ()

    (Arizona State University)

  • 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, is 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% 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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7579.

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Length: 38 pages
Date of creation: Aug 2013
Publication status: forthcoming in: Economic Journal
Handle: RePEc:iza:izadps:dp7579
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Keywords: competitiveness; overconfidence; risk aversion; subjective expectations; gender differences; earnings; college majors;

Other versions of this item:

Find related papers by 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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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. Arthur Schram & Jordi Brandts & Klarita Gërxhani, 2015. "Status Ranking: A Hidden Channel to Gender Inequality under Competition," Working Papers 817, Barcelona Graduate School of Economics.
  3. 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.
  4. Arcidiacono, Peter & Hotz, V. Joseph & Maurel, Arnaud & Romano, Teresa, 2014. "Recovering Ex Ante Returns and Preferences for Occupations using Subjective Expectations Data," IZA Discussion Papers 8549, Institute for the Study of Labor (IZA).
  5. Kirkebøen, Lars & Leuven, Edwin & Mogstad, Magne, 2014. "Field of Study, Earnings, and Self-Selection," Memorandum 29/2014, Oslo University, Department of Economics.
  6. 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.
  7. 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.
  8. 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).
  9. Koch, Alexander & Nafziger, Julia & Nielsen, Helena Skyt, 2015. "Behavioral economics of education," Journal of Economic Behavior & Organization, Elsevier, vol. 115(C), pages 3-17.

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