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

Author

Listed:
  • 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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    1. Robert E. Hall & Andreas I. Mueller, 2018. "Wage Dispersion and Search Behavior: The Importance of Nonwage Job Values," Journal of Political Economy, University of Chicago Press, vol. 126(4), pages 1594-1637.
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    3. Kyle Herkenhoff, 2016. "The Impact of Consumer Credit Access on Employment, Earnings and Entrepreneurship," 2016 Meeting Papers 781, Society for Economic Dynamics.
    4. Jeremy Lise, 2013. "On-the-Job Search and Precautionary Savings," Review of Economic Studies, Oxford University Press, vol. 80(3), pages 1086-1113.
    5. Yan Ji, 2017. "Job Search under Debt: Aggregate Implications of Student Loans," 2017 Meeting Papers 222, Society for Economic Dynamics.
    6. Joseph G. Altonji & Lisa B. Kahn & Jamin D. Speer, 2016. "Cashier or Consultant? Entry Labor Market Conditions, Field of Study, and Career Success," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 361-401.
    7. Alexandre Mas & Amanda Pallais, 2017. "Valuing Alternative Work Arrangements," American Economic Review, American Economic Association, vol. 107(12), pages 3722-3759, December.
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    9. Rothstein, Jesse & Rouse, Cecilia Elena, 2011. "Constrained after college: Student loans and early-career occupational choices," Journal of Public Economics, Elsevier, vol. 95(1), pages 149-163.
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    12. Delavande, Adeline & Zafar, Basit, 2014. "University choice: the role of expected earnings, non-pecuniary outcomes and financial constraints," ISER Working Paper Series 2014-38, Institute for Social and Economic Research.
    13. Chernozhukov, Victor & Hong, Han, 2003. "An MCMC approach to classical estimation," Journal of Econometrics, Elsevier, vol. 115(2), pages 293-346, August.
    14. Martin Gervais & Nicolas L. Ziebarth, 2019. "Life After Debt: Postgraduation Consequences Of Federal Student Loans," Economic Inquiry, Western Economic Association International, vol. 57(3), pages 1342-1366, July.
    15. Dey, Matthew & Flinn, Christopher, 2008. "Household search and health insurance coverage," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 43-63, July.
    16. Thibaut Lamadon, 2014. "Productivity Shocks, Dynamic Contracts and Income Uncertainty," 2014 Meeting Papers 243, Society for Economic Dynamics.
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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. 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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