Working Paper: CEPR ID: DP2817
Authors: Giorgio Brunello; Claudio Lucifora; Rudolf Winterebmer
Abstract: Expected earnings and expected returns to education are seen by labour economists as a major determinant of educational attainment. In spite of this, the empirical knowledge about expectations and their formation is scarce. In this Paper we report the results of the first systematic study of the wage expectations of European college students. Our data are based on the replies to the same questionnaire by more than 6000 college students all over Europe. We study the determinants of wage expectations and expected employment probabilities, the variability of these expectations within a field of study and their variation across universities and fields. We also examine the trade-off between expected starting wages and wage growth. In the final section of the paper, we contrast expected returns to education with actual returns estimated from country-specific microdata. In line with US studies we find that students overestimate returns to education.
Keywords: expectations; formation; information processing; returns to education
JEL Codes: J30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher initial wage expectations (J31) | lower future earnings growth (O49) |
| institutional factors (D02) | variability of expected wage gains (J31) |
| field of study (A12) | expected college wages (J39) |
| gender (J16) | expected college wages (J39) |
| age (J14) | expected college wages (J39) |
| family background (J12) | expected college wages (J39) |
| perceived relative ability (D29) | expected wages (J31) |
| completion of college within required time frame (I23) | expected wages (J31) |
| productivity growth (O49) | expected wage gains (J31) |
| union density and minimum wages (J50) | expected wage gains (J31) |
| expected college wage gains (D29) | actual wage gains (J31) |