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Determinants of college major choice: identification using an information experiment
This paper studies the determinants of college major choice using an experimentally generated panel of beliefs, obtained by providing students with information on the true population distribution of various major-specific characteristics. Students logically revise their beliefs in response to the information, and their subjective beliefs about future major choice are associated with beliefs about their own earnings and ability. We estimate a rich model of college major choice using the panel of beliefs data. While expected earnings and perceived ability are a significant determinant of major ...
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Intended college attendance: evidence from an experiment on college returns and costs
Despite a robust college premium, college attendance rates in the United States have remained stagnant and exhibit a substantial socioeconomic gradient. We focus on information gaps?specifically, incomplete information about college benefits and costs?as a potential explanation for these patterns. For this purpose, we conduct an information experiment about college returns and costs embedded within a representative survey of U.S. household heads. We show that, at the baseline, perceptions of college costs and benefits are severely and systematically biased: 75 percent of our respondents ...
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Double majors: one for me, one for the parents?
At least a quarter of college students in the United States graduate with more than one undergraduate major. This paper investigates how students decide on the composition of their paired majors? In other words, whether the majors chosen are substitutes or complements. Since students use both their preferences and their expectations about major-specific outcomes when choosing their majors, I collect innovative data on subjective expectations, drawn from a sample of Northwestern University sophomores. Despite showing substantial heterogeneity in beliefs, the students seem aware of differences ...
Working Paper
Subjective Earnings Risk
While earnings risk is essentially subjective, it is typically inferred from administrative data. We introduce a survey to measure subjective earnings risk, paying particular attention to the expected impacts of job transitions on earnings. Linking with administrative data provides multiple credibility checks. Subjective expectations about earnings growth and job transitions are consistent with actual realizations when appropriately aggregated. We also find subjective earnings risk is lower than risk inferred from administrative data because expected earnings growth is heterogeneous, even ...
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Subjective Intertemporal Substitution
We estimate the elasticity of intertemporal substitution (EIS)—the response of expected consumption growth to changes in the real interest rate—using subjective expectations data from the New York Fed’s Survey of Consumer Expectations (SCE). This unique data set allows us to estimate the consumption Euler equation with no auxiliary assumptions on the properties of expectations, which are instead necessary when using choice data. We find a subjective EIS of about 0.5, consistent with the results of much of the literature. In addition, planned consumption displays excess sensitivity to ...
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Human capital investments and expectations about career and family
This paper studies how individuals believe human capital investments will affect their future career and family life. We conducted a survey of high-ability currently enrolled college students and elicited beliefs about how their choice of college major, and whether to complete their degree at all, would affect a wide array of future events, including future earnings, employment, marriage prospects, potential spousal characteristics, and fertility. We find that students perceive large ?returns" to human capital not only in their own future earnings, but also in a number of other dimensions ...
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Preferences and biases in educational choices and labor market expectations: shrinking the black box of gender
Standard observed characteristics explain only part of the differences between men and women in education choices and labor market trajectories. Using an experiment to derive students' levels of overconfidence, and preferences for competitiveness and risk, this paper investigates whether these behavioral biases and preferences explain gender differences in college major choices and expected future earnings. In a sample of high-ability undergraduates, we find that competitiveness and overconfidence, but not risk aversion, are systematically related with expectations about future earnings: ...
Working Paper
Subjective Earnings Risk
We introduce a survey instrument to measure earnings risk allowing for the possibility of quitting or being fired from the current job. We find these transitions to be the key drivers of subjective risk. A link with administrative data provides multiple credibility checks for correspondingly aggregated data. Yet it reveals subjective earning risk to be many times smaller than traditional estimates imply even when conditioning richly on demographics and job history. A life-cycle search model calibrated to match data on job transitions and earnings can replicate the distribution of subjective ...
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University choice: the role of expected earnings, non-pecuniary outcomes, and financial constraints
We investigate the determinants of students? university choice, with a focus on expected monetary returns, non-pecuniary factors enjoyed at school, and financial constraints, in the Pakistani context. To mitigate the identification problem concerning the separation of preferences, expectations, and markets constraints, we combine rich data on individual-specific subjective expectations about labor market and non-pecuniary outcomes, with direct measures of financial constraints and students? stated school choice both with and without financial constraints. Estimates from a life-cycle model ...
Working Paper
Subjective Earnings Risk
While earnings risk is essentially subjective, it is typically inferred from administrative data. We introduce a survey to measure subjective earnings risk, paying particular attention to the expected impacts of job transitions on earnings. Linking with administrative data provides multiple credibility checks. Subjective expectations about earnings growth and job transitions are consistent with actual realizations when appropriately aggregated. We also find subjective earnings risk is lower than risk inferred from administrative data because expected earnings growth is heterogeneous, even ...