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Assets and Job Choice: Student Debt, Wages, and Job Satisfaction

Author

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  • Mi Luo

    (Emory University)

  • Simon Mongey

    (University of Chicago)

Abstract

Higher student debt causes college students to take jobs with higher wages and lower job satisfaction. We arrive at this finding using representative samples of college graduates and exploiting variation in financial aid policies to identify the causal effect of debts on job choices. When we extend the search with asset framework of Lise (2013) to accommodate non-pecuniary amenities the model matches our empirical findings: higher debt tilts acceptance policies toward high wage, low satisfaction jobs. In a quantitative extension we identify the utility value of amenities through observed search behavior conditional on reported satisfaction and income, finding that high satisfaction jobs are valued at 6 percent of lifetime consumption relative to low satisfaction jobs. This trade-off is large enough that computing welfare gains in a counterfactual income-based repayment policy using only wages leads to a mistaken inference that students prefer a fixed repayment policy.

Suggested Citation

  • Mi Luo & Simon Mongey, 2019. "Assets and Job Choice: Student Debt, Wages, and Job Satisfaction," 2019 Meeting Papers 1220, Society for Economic Dynamics.
  • Handle: RePEc:red:sed019:1220
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    References listed on IDEAS

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    Cited by:

    1. François Fontaine & Janne Nyborg Jensen & Rune Vejlin, 2019. "Wealth, Portfolios, and Unemployment Duration," 2019 Meeting Papers 949, Society for Economic Dynamics.
    2. Morchio, Iacopo & Moser, Christian, 2018. "The Gender Pay Gap: Micro Sources and Macro Consequences," MPRA Paper 99276, University Library of Munich, Germany, revised 24 Mar 2020.
    3. Gustavo Mellior, 2020. "Higher education funding, welfare and inequality in equilibrium," Economics Series Working Papers 908, University of Oxford, Department of Economics.

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