The effect of superstar firms on college major choice

Darwin Choi, Dong Lou and Abhiroop Mukherjee

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study the effect of superstar firms on an important human capital decision - college students' choice of major. Past salient, extreme events in an industry, as proxied by cross-sectional skewness in stock returns (or in favorable news coverage), are associated with a disproportionately larger number of college students choosing to major in related fields, even after controlling for the average industry return. This tendency to follow the superstars, however, results in a temporary over-supply of human capital. Specifically, we provide evidence that the additional labor supply due to salient, extreme events lowers the average wage earned by entry-level employees when students enter the job market. At the same time, employment size and employee turnover stay roughly constant in related industries, consistent with the view that labor demand is relatively inelastic in the short run. In the longer term, firms cope with the supply increase by gradually expanding the number of positions that require prior experience.

Keywords: college major choice; human capital; superstars; return skewness (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G20 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2018-04-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://eprints.lse.ac.uk/118941/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:118941

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().