Investment over the Business Cycle: Insights from College Major Choice

Erica Blom (), Brian Cadena and Benjamin Keys
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Erica Blom: affiliation not available

No 9167, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper examines the relationship between individuals' personal exposure to economic conditions and their investment choices in the context of human capital. Focusing on bachelor's degree recipients, we find that birth cohorts exposed to higher unemployment rates during typical schooling years select majors that earn higher wages, that have better employment prospects, and that more often lead to work in a related field. Much of this switching behavior can be considered a rational response to differences in particular majors' labor market prospects during a recession. However, higher unemployment leads to other meaningful changes in the distribution of majors. Conditional on changes in lifetime expected earnings, recessions encourage women to enter male-dominated fields, and students of both genders pursue more difficult majors, such as STEM fields. These findings imply that the economic environment changes how students select majors, possibly by encouraging them to consider a broader range of possible degree fields. Finally, in the absence of this compensating behavior, we estimate that the average estimated costs of graduating in a recession would be roughly ten percent larger.

Keywords: gender differences; STEM majors; human capital investment; business cycle; college major (search for similar items in EconPapers)
JEL-codes: E32 I23 J22 J24 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2015-07
New Economics Papers: this item is included in nep-edu, nep-lma and nep-mac
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Citations: View citations in EconPapers (37)

Published - published in: Journal of Labor Economics, 2021, 39 (4), 1043–1082

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Journal Article: Investment over the Business Cycle: Insights from College Major Choice (2021)
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