Choosing the Field of Study in Post-Secondary Education: Do Expected Earnings Matter?

39 Pages Posted: 21 Apr 2009

See all articles by Magali Beffy

Magali Beffy

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); Institute for the Study of Labor (IZA)

Denis Fougère

National Center for Scientific Research (CNRS); CNRS and SCIENCES PO PARIS; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Arnaud Maurel

Duke University - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Abstract

This paper examines the determinants of the choice of the major when the length of studies is uncertain, by using a framework in which students entering post-secondary education are assumed to anticipate their future earnings. For that purpose, we use French data coming from the 1992 and 1998 Génération surveys collected by the Centre d'Etudes et de Recherches sur l'Emploi et les Qualifications (CEREQ, Marseille). Our econometric approach is based on a semi-structural three-equations model, which is identified thanks to some exclusion restrictions. We exploit in particular exogenous variations in the earnings returns associated with the majors across the business cycle, in order to identify the causal effect of expected earnings on the probability of choosing a given major. Relying on a three-component mixture distribution, we account for correlation between the unobserved individual-specific terms affecting the preferences for the majors, the unobserved individual-specific factors entering the equation determining the length of studies within each major, and that affecting the labor market earnings equation. Following Arcidiacono and Jones (2003), we use the EM algorithm with a sequential maximization step to produce consistent parameter estimates. Simulating for each given major a 10 percent increase in the expected earnings suggests that expected earnings have a statistically significant but quantitatively small impact on the allocation of students across majors.

Keywords: post-secondary education, major choice, returns to education, EM algorithm

JEL Classification: J24, C35, D84

Suggested Citation

Beffy, Magali and Fougere, Denis and Fougere, Denis and Maurel, Arnaud, Choosing the Field of Study in Post-Secondary Education: Do Expected Earnings Matter?. Available at SSRN: https://ssrn.com/abstract=1391799 or http://dx.doi.org/10.2139/ssrn.1391799

Magali Beffy (Contact Author)

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Institute for the Study of Labor (IZA)

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Denis Fougere

CNRS and SCIENCES PO PARIS ( email )

28 rue des saints peres
Paris, 75007
France
+33149543764 (Phone)
75007 (Fax)

HOME PAGE: http://https://www.sciencespo.fr/osc/fr/node/1609.html

National Center for Scientific Research (CNRS)

3, rue Michel-Ange
Paris cedex 16, 75794
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Arnaud Maurel

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
60
Abstract Views
773
rank
446,079
PlumX Metrics