Working Paper: NBER ID: w15729
Authors: Peter Arcidiacono; V. Joseph Hotz; Songman Kang
Abstract: The choice of a college major plays a critical role in determining the future earnings of college graduates. Students make their college major decisions in part due to the future earnings streams associated with the different majors. We survey students about what their expected earnings would be both in the major they have chosen and in counterfactual majors. We also elicit students' subjective assessments of their abilities in chosen and counterfactual majors. We estimate a model of college major choice that incorporates these subjective expectations and assessments. We show that both expected earnings and students' abilities in the different majors are important determinants of student's choice of a college major. We also show that students' forecast errors with respect to expected earnings in different majors is potentially important, with our estimates suggesting that 7.5% of students would switch majors if they made no forecast errors.
Keywords: college major choice; expected earnings; subjective assessments; forecast errors
JEL Codes: I2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| equalizing abilities across majors (D29) | decrease in humanities majors (A12) |
| equalizing abilities across majors (D29) | increase in economics majors (A23) |
| forecast errors regarding future earnings (G17) | switch majors (A22) |
| expected earnings (G17) | major choice (M49) |
| subjective assessments of abilities (G53) | major choice (M49) |