The Effect of Changes in the Skill Premium on College Degree Attainment and the Choice of Major

47 Pages Posted: 18 Nov 2019

See all articles by Ran Abramitzky

Ran Abramitzky

Stanford University

Victor Lavy

University of Warwick - Department of Economics; Hebrew University of Jerusalem - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Maayan Segev

Hebrew University of Jerusalem - Department of Economics

Date Written: November 2019

Abstract

We study the impact of financial incentives on higher education decisions and the choice of major. We rely on a reform whereby Israeli kibbutzim shifted from their traditional policy of equal sharing to productivity-based wages. We use for identification the staggered implementation of this reform in different kibbutzim. In this setting of very low initial returns to education, we find that the dramatic increase in the rate of return and its sharp variation across fields of study led to a large increase in the probability of receiving a Bachelor degree, especially in STEM fields of study that are expected to yield higher financial returns. For men this increase was largely in computer science and engineering, and for women in biology, chemistry and computer science. Our findings suggest that investment in higher education and the choice of major are responsive to increases in the return to education for both men and women.

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Suggested Citation

Abramitzky, Ran and Lavy, Victor and Segev, Maayan, The Effect of Changes in the Skill Premium on College Degree Attainment and the Choice of Major (November 2019). NBER Working Paper No. w26420. Available at SSRN: https://ssrn.com/abstract=3488953

Ran Abramitzky (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

Victor Lavy

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

Hebrew University of Jerusalem - Department of Economics ( email )

Mount Scopus
Jerusalem, 91905
Israel
+972 2 588 3245 (Phone)
+972 2 581 6071 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Maayan Segev

Hebrew University of Jerusalem - Department of Economics ( email )

Jerusalem
Israel

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