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Risky Business? The Effect of Majoring in Business on Earnings and Educational Attainment

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  • Rodney J. Andrews
  • Scott A. Imberman
  • Michael F. Lovenheim

Abstract

One of the most important decisions a student can make during the course of his or her college career is the choice of major. The field of study a student selects translates directly into the types of skills and knowledge he or she will obtain during college, and it can influence the type of career chosen after postsecondary education ends. Business is one of the most popular majors in the US, accounting for 19% of all college degrees granted. We study the impact of choosing a business major using a regression discontinuity design that exploits GPA cutoffs for switching majors in some Texas universities. Even though nearly 60% of marginal business majors would have majored in a STEM field otherwise, we find large and statistically significant increases in earnings of 80% to 130% 12+ years after college entry, driven mainly by women. These are considerably larger than OLS estimates that condition on a rich set of demographic, high school achievement, and high school fixed-effects controls, which is consistent with students choosing majors based on comparative advantage. We do not find statistically significant effects of majoring in business on educational outcomes, except for positive effects on male 6-year graduation rates.

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  • Rodney J. Andrews & Scott A. Imberman & Michael F. Lovenheim, 2017. "Risky Business? The Effect of Majoring in Business on Earnings and Educational Attainment," NBER Working Papers 23575, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23575
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    2. Gordon B. Dahl & Dan-Olof Rooth & Anders Stenberg, 2024. "Intergenerational and Sibling Spillovers in High School Majors," American Economic Journal: Economic Policy, American Economic Association, vol. 16(3), pages 133-173, August.
    3. Rajashri Chakrabarti & Nicole Gorton & Michael F. Lovenheim, 2020. "State Investment in Higher Education: Effects on Human Capital Formation, Student Debt, and Long-term Financial Outcomes of Students," NBER Working Papers 27885, National Bureau of Economic Research, Inc.
    4. Britton, Jack & van der Erve, Laura & Belfield, Chris & Vignoles, Anna & Dickson, Matt & Zhu, Yu & Walker, Ian & Dearden, Lorraine & Sibieta, Luke & Buscha, Franz, 2022. "How much does degree choice matter?," Labour Economics, Elsevier, vol. 79(C).
    5. Anthony LokTing Yim, 2023. "How Early Morning Classes Change Academic Trajectories: Evidence from a Natural Experiment," Purdue University Economics Working Papers 1334, Purdue University, Department of Economics.
    6. Joshua Goodman & Michael Hurwitz & Christine Mulhern & Jonathan Smith, 2019. "O Brother, Where Start Thou? Sibling Spillovers in College Enrollment," NBER Working Papers 26502, National Bureau of Economic Research, Inc.
    7. Andrew McEachin & Thurston Domina & Andrew Penner, 2020. "Heterogeneous Effects of Early Algebra across California Middle Schools," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(3), pages 772-800, June.
    8. Lelys Dinarte-Diaz & Maria Marta Ferreyra & Tatiana Melguizo & Angelica Sanchez, 2023. "The Contribution of Short-Cycle Programs to Student Outcomes: Evidence from Colombia," CESifo Working Paper Series 10262, CESifo.
    9. Dahl, Gordon B. & Rooth, Dan-Olof & Stenberg, Anders, 2020. "Long-Run Returns to Field of Study in Secondary School," IZA Discussion Papers 13508, Institute of Labor Economics (IZA).
    10. Brown, Craig O., 2020. "Economic leadership and growth," Journal of Monetary Economics, Elsevier, vol. 116(C), pages 298-333.
    11. Gordon Dahl & Dan-Olof Rooth & Anders Stenberg, 2020. "High School Majors, Comparative (Dis)Advantage, and Future Earnings," NBER Working Papers 27524, National Bureau of Economic Research, Inc.
    12. Ferreyra,Maria Marta & Franco Hernandez,Andrea & Melguizo,Tatiana & Sanchez Diaz,Angelica Maria, 2020. "Estimating the Contribution of Short-Cycle Programs to Student Outcomes in Colombia," Policy Research Working Paper Series 9424, The World Bank.
    13. Arpita Patnaik & Matthew J. Wiswall & Basit Zafar, 2020. "College Majors," NBER Working Papers 27645, National Bureau of Economic Research, Inc.
    14. Bleemer, Zachary, 2024. "How Helpful Are Average Wage-By-Major Statistics In Choosing A Field Of Study?," University of California at Berkeley, Center for Studies in Higher Education qt0pf717bh, Center for Studies in Higher Education, UC Berkeley.
    15. Ghazala Azmat & Jack Britton, 2024. "Labour Market Returns to Higher Education," Post-Print hal-04709561, HAL.

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    More about this item

    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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