The Specificity of General Human Capital: Evidence from College Major Choice

Ronni Pavan and Josh Kinsler
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Josh Kinsler: University of Rochester

No 1036, 2012 Meeting Papers from Society for Economic Dynamics

Abstract: In this paper we develop a model to estimate the return to college major and to understand why students appear to give up part of their earnings potential by selecting less profitable majors. Starting from the empirical evidence that individuals who work in a job related to their major field of study earn significantly higher wages than those working in jobs unrelated to their major, we build a model in which part of the human capital accumulated while in college is specific to their field of study. This specificity of human capital may introduce a sort of occupational risk if the potential human capital is not perfectly observed by the agent at the moment of major choice. After rejecting the hypothesis that agents have perfect knowledge over their potential future labor market abilities, we show that this type of occupational risk helps explain why relatively few students choose science related majors.

Date: 2012
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