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Do Education Decisions Respond to Returns by Field of Study?

  • Gunderson, Morley
  • Krashinsky, Harry

We utilize the 2000 cohort of university graduates from the National Graduate Survey (NGS) to estimate the extent to which the choice of field of study is influenced by expected returns to those fields of study. The expected returns are based on earnings equations estimated from the earlier 1990 NGS cohort for the years 1992 and 1995 -- years that are around the time when the 2000 cohort would be applying to university and forming expectations of their expected returns by field of study. We estimate those expected returns using conventional OLS earnings equations as well as IV estimates to account for the potential endogeneity of the returns by field of study since selection effects may bias the expected returns. Our IV estimates utilize measures of skill-biased technological change as instruments. Overall, our results suggest that prospective students do choose fields of study in part at least on the basis of earnings they can expect to receive in those fields. Furthermore, earnings expectations formed around the time they are applying are more influential than earnings expectations based on years further away from that time, although both generally have an impact on the choice of field of study.

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File URL: http://www.clsrn.econ.ubc.ca/workingpapers/CLSRN%20Working%20Paper%20no.%2047%20-%20Gunderson%20and%20Krashinsky.pdf
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Paper provided by Vancouver School of Economics in its series CLSSRN working papers with number clsrn_admin-2009-62.

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Length: 39 pages
Date of creation: 28 Nov 2009
Date of revision: 28 Nov 2009
Handle: RePEc:ubc:clssrn:clsrn_admin-2009-62
Contact details of provider: Web page: http://www.clsrn.econ.ubc.ca/

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  1. Julian R. Betts, 1996. "What Do Students Know about Wages? Evidence from a Survey of Undergraduates," Journal of Human Resources, University of Wisconsin Press, vol. 31(1), pages 27-56.
  2. Jeff Grogger & Eric Eide, 1995. "Changes in College Skills and the Rise in the College Wage Premium," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 280-310.
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  10. Loury, Linda Datcher & Garman, David, 1995. "College Selectivity and Earnings," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 289-308, April.
  11. Arcidiacono, Peter, 2002. "Ability Sorting and the Returns to College Major," Working Papers 02-26, Duke University, Department of Economics.
  12. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
  13. Jack Fiorito & Robert C. Duffenbach, 1982. "Market and nonmarket influences on curriculum choice by college students," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 36(1), pages 88-101, October.
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  25. Blakemore, Arthur E & Low, Stuart A, 1984. "Sex Differences in Occupational Selection: The Case of College Majors," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 157-63, February.
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