Institution, Major, and Firm-Specific Premia: Evidence from Administrative Data

Ost, Ben; Pan, Weixiang; Webber, Douglas A.

doi:10.21799/frbp.wp.2019.24

Working Paper

Institution, Major, and Firm-Specific Premia: Evidence from Administrative Data

Abstract: We examine how a student?s major and the institution attended contribute to the labor market outcomes of young graduates. Administrative panel data that combine student transcripts with matched employer-employee records allow us to provide the first decomposition of premia into individual and firm-specific components. We find that both major and institutional premia are more strongly related to the firm-specific component of wages than the individual-specific component of wages. On average, a student?s major is a more important predictor of future wages than the selectivity of the institution attended, but major premia (and their relative ranking) can differ substantially across institutions, suggesting the importance of program-level data for prospective students and their parents.

Keywords: college quality; returns to major; firm-specific premium;

JEL Classification: I23; I24; I26;

https://doi.org/10.21799/frbp.wp.2019.24