Will Studying Economics Make You Rich? A Regression Discontinuity Analysis of the Returns to College Major
42 Pages Posted: 20 May 2020
Date Written: April 2020
Selection bias may confound the identification of field-specific returns to higher education. This study investigates the wage return to studying economics by leveraging a policy that prevented students with low introductory grades from declaring the major. Regression discontinuity estimates show that policy-complying economics majors — who appear representative on observables — earned $22,000 (58%) higher annual early-career wages than they would have with their second-choice majors, despite otherwise-unchanged educational investment and attainment. Cross-industry wage variation explains half of the return, with economics majors channeled towards high-wage economics-related industries. Differences between institution-specific or nationally-representative average wages by major well-approximate the estimated causal return.
Keywords: Economics of Education, College Major, Higher Education
JEL Classification: A22,I26,J24,J31
Suggested Citation: Suggested Citation