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Field of study and the decision to delay university

Kelly Foley () and Fane Groes ()

No 4, CLEF Working Paper Series from Canadian Labour Economics Forum (CLEF), University of Waterloo

Abstract: Using administrative data from Danish Population Registers, we document a strong relationship between the propensity to delay entering university and the field of study entered. For example, students in the humanities are 2.5 times more likely to have delayed than those in Engineering. We build and estimate a dynamic discrete choice model, in which students choose whether to enter one of 30 university programs or to delay. Delaying has option value because during the sample period, Danish admissions requirements were lower for students with work experience. The model is partially identified by exogenous uctuations, over time, in program-specific minimum- GPA admissions criteria. We use the model to estimate the value of delay, conditional on field of study, by comparing the utility students experience after one or two years of delay to the utility they would gain from entering the same program without delay. We then decompose the value of delay into various components including that attributable to earnings during delay and schooling, and lifetime post- schooling earnings. We find that although the costs of delaying, in terms of lost lifetime-earnings, vary according to field of study, that variation can not account for the differences in the propensity to delay. While delayers earn income during their gap years and have on average higher earnings during schooling, this benefit to delaying is relatively uniform across the different fields, and as such does not explain the observed delaying behaviour. We also perform partial-equilibrium counterfactual experiments that manipulate minimum-GPA admissions criteria to investigate whether option value drives differences in the propensity to delay. We find that humanities students do respond most to changes in admissions criteria, but at most the gap in delaying between Humanities and Engineering students closes by a third. Instead, only unobserved differences in the value of delay are large enough to explain the variation in delaying across fields of study. If these unobserved differences are interpreted as preferences, our finding is in keeping with other structural schooling models, and suggests that delay is a potentially important dimension which deserves more attention in that literature.

Date: 2016
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