Human Capital, Uncertain Wage Distributions, and Occupational and Educational Choices

Peter Orazem and J Peter Mattila

International Economic Review, 1991, vol. 32, issue 1, 103-22

Abstract: This study develops a model of occupational and educational choices. Individuals are assumed to choose careers based on expected utility maximization, given uncertainty concerning future earnings. The model directly leads to estimable equations relating career choices to the moments of occupational earnings distributions. The authors report maximum likelihood estimates using a sample of high school graduates from Maryland school districts, 1951-69. The eight observed career choices respond as expected to the first and second moments of the earnings distribution and to a measure of school quality. Reasonable estimates of human capital production and supply elasticities are obtained for the career choices. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1991
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