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College Major Choice: Sorting and Differential Returns to Skills

John Humphries, Juanna Joensen and Gregory Veramendi

No 1623, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: Does the college major premium reflect returns to prior abilities or college education? We decompose the college major premium into labor market returns to multidimensional abilities (grit, interpersonal, and cognitive) and skills learned in college. This allows us to quantify how much of the college major premium is due to sorting on multi-dimensional abilities and how much is due to the differential labor market value of major-specific skills. We find that sorting on abilities accounts for 10-50\% of the college major premium. We also provide novel estimates of complementarities and interaction effects between abilities and skills, since the returns to abilities vary significantly across college majors. We document that 40\% of students who enter STEM degrees change major or drop out. We evaluate counterfactual policies to promote STEM degrees, accounting for the fact that many who start STEM degrees do not finish.

Date: 2017
New Economics Papers: this item is included in nep-edu and nep-ltv
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More papers in 2017 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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