IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp8549.html
   My bibliography  Save this paper

Recovering Ex Ante Returns and Preferences for Occupations using Subjective Expectations Data

Author

Listed:
  • Arcidiacono, Peter

    () (Duke University)

  • Hotz, V. Joseph

    () (Duke University)

  • Maurel, Arnaud

    () (Duke University)

  • Romano, Teresa

    () (Goucher College)

Abstract

We show that data on subjective expectations, especially on outcomes from counterfactual choices and choice probabilities, are a powerful tool in recovering ex ante treatment effects as well as preferences for different treatments. In this paper we focus on the choice of occupation, and use elicited beliefs from a sample of male undergraduates at Duke University. By asking individuals about potential earnings associated with counterfactual choices of college majors and occupations, we can recover the distribution of the ex ante monetary returns to particular occupations, and how these returns vary across majors. We then propose a model of occupational choice which allows us to link subjective data on earnings and choice probabilities with the non-pecuniary preferences for each occupation. We find large differences in expected earnings across occupations, and substantial heterogeneity across individuals in the corresponding ex ante returns. However, while sorting across occupations is partly driven by the ex ante monetary returns, non-monetary factors play a key role in this decision. Finally, our results point to the existence of sizable complementarities between college major and occupations, both in terms of earnings and non-monetary benefits.

Suggested Citation

  • 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 of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp8549
    as

    Download full text from publisher

    File URL: http://ftp.iza.org/dp8549.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Arcidiacono, Peter & Hotz, V. Joseph & Kang, Songman, 2012. "Modeling college major choices using elicited measures of expectations and counterfactuals," Journal of Econometrics, Elsevier, vol. 166(1), pages 3-16.
    2. V. Joseph Hotz & Robert A. Miller, 1993. "Conditional Choice Probabilities and the Estimation of Dynamic Models," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 497-529.
    3. Cunha, Flavio & Heckman, James J., 2007. "Identifying and Estimating the Distributions of Ex Post and Ex Ante Returns to Schooling," Labour Economics, Elsevier, vol. 14(6), pages 870-893, December.
    4. Adeline Delavande, 2008. "Pill, Patch, Or Shot? Subjective Expectations And Birth Control Choice," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 999-1042, August.
    5. D’Haultfœuille, Xavier & Maurel, Arnaud, 2013. "Inference on an extended Roy model, with an application to schooling decisions in France," Journal of Econometrics, Elsevier, vol. 174(2), pages 95-106.
    6. Magali Beffy & Denis Fougère & Arnaud Maurel, 2012. "Choosing the Field of Study in Postsecondary Education: Do Expected Earnings Matter?," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 334-347, February.
    7. repec:wly:econjl:v:127:y:2017:i:604:p:2153-2186 is not listed on IDEAS
    8. Kate Antonovics & Limor Golan, 2012. "Experimentation and Job Choice," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 333-366.
    9. Yu Zheng & Juan Pantano, 2012. "Using Subjective Expectations Data to Allow for Unobserved Heterogeneity in Hotz-Miller Estimation Strategies," 2012 Meeting Papers 940, Society for Economic Dynamics.
    10. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387.
    11. Asher A. Blass & Saul Lach & Charles F. Manski, 2010. "Using Elicited Choice Probabilities To Estimate Random Utility Models: Preferences For Electricity Reliability," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 421-440, May.
    12. Ernesto Reuben & Matthew Wiswall & Basit Zafar, 2017. "Preferences and Biases in Educational Choices and Labour Market Expectations: Shrinking the Black Box of Gender," Economic Journal, Royal Economic Society, vol. 127(604), pages 2153-2186, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:eecrev:v:95:y:2017:i:c:p:168-194 is not listed on IDEAS
    2. Kirkebøen, Lars & Leuven, Edwin & Mogstad, Magne, 2014. "Field of Study, Earnings, and Self-Selection," Memorandum 29/2014, Oslo University, Department of Economics.
    3. Matthew Wiswall & Basit Zafar, 2016. "Preference for the Workplace, Human Capital, and Gender," NBER Working Papers 22173, National Bureau of Economic Research, Inc.
    4. Hoffman, Mitchell & Burks, Stephen V., 2017. "Worker Overconfidence: Field Evidence and Implications for Employee Turnover and Returns from Training," IZA Discussion Papers 10794, Institute of Labor Economics (IZA).
    5. repec:oup:qjecon:v:133:y:2018:i:1:p:457-507. is not listed on IDEAS
    6. Vaishali Zambre, 2018. "The Gender Gap in Wage Expectations: Do Young Women Trade off Higher Wages for Lower Wage Risk?," Discussion Papers of DIW Berlin 1742, DIW Berlin, German Institute for Economic Research.
    7. Johannes S. Kunz & Kevin E. Staub, 2016. "Subjective Completion Beliefs and the Demand for Post-Secondary Education," SOEPpapers on Multidisciplinary Panel Data Research 878, DIW Berlin, The German Socio-Economic Panel (SOEP).
    8. repec:eee:jeborg:v:141:y:2017:i:c:p:135-150 is not listed on IDEAS
    9. Schweri, Juerg & Hartog, Joop, 2014. "Do wage expectations influence the decision to enroll in nursing college?," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100542, Verein für Socialpolitik / German Economic Association.
    10. Koşar, Gizem & Ransom, Tyler & Van der Klaauw, Wilbert, 2019. "Understanding migration aversion using elicited counterfactual choice probabilities," Staff Reports 883, Federal Reserve Bank of New York.
    11. Matthew Wiswall & Basit Zafar, 2018. "Preference for the Workplace, Investment in Human Capital, and Gender," The Quarterly Journal of Economics, Oxford University Press, vol. 133(1), pages 457-507.
    12. Estrada, Ricardo & Gignoux, Jérémie, 2017. "Benefits to elite schools and the expected returns to education: Evidence from Mexico City," European Economic Review, Elsevier, vol. 95(C), pages 168-194.
    13. Xavier D'Haultfoeuille & Christophe Gaillac & Arnaud Maurel, 2018. "Rationalizing Rational Expectations? Tests and Deviations," NBER Working Papers 25274, National Bureau of Economic Research, Inc.
    14. Teodora Boneva & Christopher Rauh, 2017. "Socio-Economic Gaps in University Enrollment: The Role of Perceived Pecuniary and Non-Pecuniary Returns," Working Papers 2017-080, Human Capital and Economic Opportunity Working Group.
    15. Matthew Wiswall & Basit Zafar, 2016. "Human Capital Investments and Expectations about Career and Family," NBER Working Papers 22543, National Bureau of Economic Research, Inc.
    16. Joseph G. Altonji & Peter Arcidiacono & Arnaud Maurel, 2015. "The Analysis of Field Choice in College and Graduate School: Determinants and Wage Effects," NBER Working Papers 21655, National Bureau of Economic Research, Inc.
    17. Teodora Boneva & Christopher Rauh, 2017. "Socio-Economic Gaps in University Enrollment: The Role of Perceived Pecuniary and Non-Pecuniary Returns," CESifo Working Paper Series 6756, CESifo Group Munich.

    More about this item

    Keywords

    ex ante treatment effects; occupational choice; subjective expectations;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp8549. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Holger Hinte). General contact details of provider: http://www.iza.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.