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Recovering Ex Ante Returns and Preferences for Occupations using Subjective Expectations Data

Peter Arcidiacono (), V. Joseph Hotz (), Arnaud Maurel () and Teresa Romano ()
Additional contact information
Peter Arcidiacono: Duke University
Teresa Romano: Goucher College

No 8549, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We show that data on subjective expectations, especially on outcomes from counterfactual choices and choice probabilities, are a powerful tool in recovering ex ante treatment effects as well as preferences for different treatments. In this paper we focus on the choice of occupation, and use elicited beliefs from a sample of male undergraduates at Duke University. By asking individuals about potential earnings associated with counterfactual choices of college majors and occupations, we can recover the distribution of the ex ante monetary returns to particular occupations, and how these returns vary across majors. We then propose a model of occupational choice which allows us to link subjective data on earnings and choice probabilities with the non-pecuniary preferences for each occupation. We find large differences in expected earnings across occupations, and substantial heterogeneity across individuals in the corresponding ex ante returns. However, while sorting across occupations is partly driven by the ex ante monetary returns, non-monetary factors play a key role in this decision. Finally, our results point to the existence of sizable complementarities between college major and occupations, both in terms of earnings and non-monetary benefits.

Keywords: ex ante treatment effects; occupational choice; subjective expectations (search for similar items in EconPapers)
JEL-codes: J24 I23 C31 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2014-10
New Economics Papers: this item is included in nep-ecm, nep-lab and nep-lma
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Citations: View citations in EconPapers (23) Track citations by RSS feed

Forthcoming in: Journal of Political Economy, 2020

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Working Paper: Recovering Ex Ante Returns and Preferences for Occupations using Subjective Expectations Data (2014) Downloads
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