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How Risky Is the Choice of a University Major?

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  • Kässi, Otto

Abstract

This paper estimates the monetary returns to different university majors and the risks related to them. The residuals from a Mincer-type income regression are decomposed into unobserved heterogeneity (known to the individual when making her education choice) and risk (unknown to the individual). The risk estimates are corrected for selection by applying the selection correction model of Lee (1983) and an instrument based on the local supply of education in different majors. The differences in risks between different majors are found to be mostly statistically insignificant but differences in returns to majors are larger and significant. Both, income uncertainty and mean returns are found to be larger for men than for women.

Suggested Citation

  • Kässi, Otto, 2014. "How Risky Is the Choice of a University Major?," MPRA Paper 59078, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:59078
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    References listed on IDEAS

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    More about this item

    Keywords

    return to education; uncertainty; selection;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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