The role of heterogeneous risk preferences, discount rates, and earnings expectations in college major choice

Arpita Patnaik, Joanna Venator, Matthew Wiswall () and Basit Zafar

Journal of Econometrics, 2022, vol. 231, issue 1, 98-122

Abstract: We estimate a rich model of college major choice using a panel of experimentally-derived data. Our estimation strategy combines two types of data: data on self-reported beliefs about future earnings from potential human capital decisions and survey-based measures of risk and time preferences. We show how to use these data to identify a general life-cycle model, allowing for rich patterns of heterogeneous beliefs and preferences. Our data allow us to separate perceptions about the degree of risk or about the current versus future payoffs for a choice from the individual’s preference for risk and patience. Comparing our estimates of the general model to estimates of models which ignore heterogeneity in risk and time preferences, we find that these restricted models overstate the importance of earnings to major choice. Additionally, we show that while men are less risk averse and patient than women, gender differences in expectations about own-earnings, risk aversion, and patience cannot explain gender gaps in major choice.

Keywords: College majors; Risk preferences; Time preferences; Subjective expectations; Uncertainty (search for similar items in EconPapers)
JEL-codes: D81 D84 I21 I23 J10 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: The Role of Heterogeneous Risk Preferences, Discount Rates, and Earnings Expectations in College Major Choice (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:231:y:2022:i:1:p:98-122

DOI: 10.1016/j.jeconom.2020.04.050

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