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The Effect of Changes in the Skill Premium on College Degree Attainment and the Choice of Major

Author

Listed:
  • Ran Abramitzky
  • Victor Lavy
  • Maayan Segev

Abstract

We study the impact of financial incentives on higher education decisions and the choice of major. We rely on a reform whereby Israeli kibbutzim shifted from their traditional policy of equal sharing to productivity-based wages. We use for identification the staggered implementation of this reform in different kibbutzim. In this setting of very low initial returns to education, we find that the dramatic increase in the rate of return and its sharp variation across fields of study led to a large increase in the probability of receiving a Bachelor degree, especially in STEM fields of study that are expected to yield higher financial returns. For men this increase was largely in computer science and engineering, and for women in biology, chemistry and computer science. Our findings suggest that investment in higher education and the choice of major are responsive to increases in the return to education for both men and women.

Suggested Citation

  • Ran Abramitzky & Victor Lavy & Maayan Segev, 2019. "The Effect of Changes in the Skill Premium on College Degree Attainment and the Choice of Major," NBER Working Papers 26420, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26420
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    More about this item

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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