Choosing the Field of Study in Post-Secondary Education: Do Expected Earnings Matter?

Magali Beffy (), Denis Fougere and Arnaud Maurel
Additional contact information
Magali Beffy: CREST-INSEE

No 4127, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper examines the determinants of the choice of the major when the length of studies is uncertain, by using a framework in which students entering post-secondary education are assumed to anticipate their future earnings. For that purpose, we use French data coming from the 1992 and 1998 Génération surveys collected by the Centre d'Etudes et de Recherches sur l'Emploi et les Qualifications (CEREQ, Marseille). Our econometric approach is based on a semi-structural three-equations model, which is identified thanks to some exclusion restrictions. We exploit in particular exogenous variations in the earnings returns associated with the majors across the business cycle, in order to identify the causal effect of expected earnings on the probability of choosing a given major. Relying on a three-component mixture distribution, we account for correlation between the unobserved individual-specific terms affecting the preferences for the majors, the unobserved individual-specific factors entering the equation determining the length of studies within each major, and that affecting the labor market earnings equation. Following Arcidiacono and Jones (2003), we use the EM algorithm with a sequential maximization step to produce consistent parameter estimates. Simulating for each given major a 10 percent increase in the expected earnings suggests that expected earnings have a statistically significant but quantitatively small impact on the allocation of students across majors.

Keywords: major choice; post-secondary education; EM algorithm; returns to education (search for similar items in EconPapers)
JEL-codes: C35 D84 J24 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2009-04
New Economics Papers: this item is included in nep-edu and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Published - published in: Review of Economics and Statistics, 2012, 94 (1), 334–347

Downloads: (external link)
https://docs.iza.org/dp4127.pdf (application/pdf)

Related works:
Journal Article: Choosing the Field of Study in Postsecondary Education: Do Expected Earnings Matter? (2012)
Working Paper: Choosing the Field of Study in Post-Secondary Education: Do Expected Earnings Matter ? (2009)
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:iza:izadps:dp4127

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().