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Uncertainty about Future Income: Initial Beliefs and Resolution During College

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  • Yifan Gong
  • Ralph Stinebrickner
  • Todd R. Stinebrickner

Abstract

We use unique data from the Berea Panel Study to characterize how much earnings uncertainty is present for students at college entrance and how quickly this uncertainty is resolved. We characterize uncertainty using survey questions that elicit the entire distribution describing one’s beliefs about future earnings. Taking advantage of the longitudinal nature of the expectations data, we find that roughly two-thirds of the income uncertainty present at the time of entrance remains at the end of college. Taking advantage of a variety of additional survey questions, we provide evidence about how the resolution of income uncertainty is influenced by factors such as college GPA and college major, and also examine why much income uncertainty remains unresolved at the end of college. This paper also contributes to a literature interested in understanding the relative importance of uncertainty and heterogeneity in determining observed earnings distributions.

Suggested Citation

  • Yifan Gong & Ralph Stinebrickner & Todd R. Stinebrickner, 2019. "Uncertainty about Future Income: Initial Beliefs and Resolution During College," NBER Working Papers 25485, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:25485
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    References listed on IDEAS

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    2. Todd Stinebrickner & Ralph Stinebrickner & Paul Sullivan, 2018. "Job Tasks and the Gender Wage Gap among College Graduates," Working Papers 2018-062, Human Capital and Economic Opportunity Working Group.
    3. Ralph Stinebrickner & Todd Stinebrickner, 2008. "The Effect of Credit Constraints on the College Drop-Out Decision: A Direct Approach Using a New Panel Study," American Economic Review, American Economic Association, vol. 98(5), pages 2163-2184, December.
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    Cited by:

    1. Yifan Gong & Todd Stinebrickner & Ralph Stinebrickner, 2019. "Marriage, Children, and Labor Supply: Beliefs and Outcomes," Working Papers 2019-060, Human Capital and Economic Opportunity Working Group.
    2. Jane Greve & Morten Saaby & Anders Rosdahl & Vibeke Tornhøj Christensen, 2021. "Uncertain occupational expectations at age 19 and later educational and labour market outcomes," LABOUR, CEIS, vol. 35(2), pages 163-191, June.
    3. Tsiaplias, Sarantis, 2020. "Time-Varying Consumer Disagreement and Future Inflation," Journal of Economic Dynamics and Control, Elsevier, vol. 116(C).
    4. Juerg Schweri, 2021. "Predicting polytomous career choices in healthcare using probabilistic expectations data," Health Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 544-563, March.
    5. Pamela Giustinelli, 2022. "Expectations in Education: Framework, Elicitation, and Evidence," Working Papers 2022-026, Human Capital and Economic Opportunity Working Group.
    6. Crossley, Thomas F. & Gong, Yifan & Stinebrickner, Ralph & Stinebrickner, Todd, 2022. "The ex post accuracy of subjective beliefs: A new measure and decomposition," Economics Letters, Elsevier, vol. 210(C).
    7. Gong, Yifan & Stinebrickner, Ralph & Stinebrickner, Todd, 2022. "Marriage, children, and labor supply: Beliefs and outcomes," Journal of Econometrics, Elsevier, vol. 231(1), pages 148-164.
    8. Arpita Patnaik & Matthew J. Wiswall & Basit Zafar, 2020. "College Majors," NBER Working Papers 27645, National Bureau of Economic Research, Inc.
    9. Yifan Gong & Todd Stinebrickner & Ralph Stinebrickner, 2020. "Perceived and actual option values of college enrollment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(7), pages 940-959, November.

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    More about this item

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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