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Knowledge of earnings risk and major choice: Evidence from an information experiment

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  • Ruder, Alexander I.
  • Van Noy, Michelle

Abstract

Policymakers increasingly seek to inform students about the expected economic returns to different college majors. Less attention has been given to the earnings risk of major choice. In this paper, we use an experiment to study the impact of an information intervention by providing individuals with data that show the earnings risk of a major choice. Our intervention allows us to compare earnings risk and major preferences among a group who is informed about earnings risk compared to a group not given information about risk. Our results show that individuals who see information about earnings risk form different earnings risk estimates and preferences over majors than individuals who see median earnings only. These differences show the negative consequences of making academic major decisions when holding incorrect estimates of earnings risk, and suggest the value of including earnings risk in tools such as college scorecards to inform students.

Suggested Citation

  • Ruder, Alexander I. & Van Noy, Michelle, 2017. "Knowledge of earnings risk and major choice: Evidence from an information experiment," Economics of Education Review, Elsevier, vol. 57(C), pages 80-90.
    • Handle: RePEc:eee:ecoedu:v:57:y:2017:i:c:p:80-90
    DOI: 10.1016/j.econedurev.2017.02.001
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    References listed on IDEAS

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    Cited by:

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    2. David E. Altig & Elias Ilin & Alexander Ruder & Ellyn Terry, 2020. "Benefits Cliffs and the Financial Incentives for Career Advancement: A Case Study of the Health Care Services Career Pathway," FRB Atlanta Community and Economic Development Discussion Paper 2020-01, Federal Reserve Bank of Atlanta.
    3. Koşar, Gizem & Ransom, Tyler & van der Klaauw, Wilbert, 2022. "Understanding migration aversion using elicited counterfactual choice probabilities," Journal of Econometrics, Elsevier, vol. 231(1), pages 123-147.
    4. Gizem Koşar & Cormac O'Dea, 2022. "Expectations Data in Structural Microeconomic Models," NBER Working Papers 30094, National Bureau of Economic Research, Inc.
    5. Jacopo Mazza & Hans van Ophem, 2020. "Educational Choice, Initial Wage and Wage Growth," Tinbergen Institute Discussion Papers 20-030/III, Tinbergen Institute.
    6. Hans Ophem & Jacopo Mazza, 2024. "Educational choice, initial wage and wage growth," Empirical Economics, Springer, vol. 67(3), pages 1235-1274, September.
    7. Bonilla-Mejía, Leonardo & Bottan, Nicolas L. & Ham, Andrés, 2019. "Information policies and higher education choices experimental evidence from Colombia," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 83(C).
    8. Vaishali Zambre, 2018. "The Gender Gap in Wage Expectations: Do Young Women Trade off Higher Wages for Lower Wage Risk?," Discussion Papers of DIW Berlin 1742, DIW Berlin, German Institute for Economic Research.
    9. Patnaik, Arpita & Venator, Joanna & Wiswall, Matthew & Zafar, Basit, 2022. "The role of heterogeneous risk preferences, discount rates, and earnings expectations in college major choice," Journal of Econometrics, Elsevier, vol. 231(1), pages 98-122.
    10. Kettlewell, Nathan & Walker, Matthew J. & Yoo, Hong Il, 2024. "Alternative Models of Preference Heterogeneity for Elicited Choice Probabilities," IZA Discussion Papers 16821, Institute of Labor Economics (IZA).
    11. Arpita Patnaik & Matthew J. Wiswall & Basit Zafar, 2020. "College Majors," NBER Working Papers 27645, National Bureau of Economic Research, Inc.
    12. Zhou, Yonghong, 2023. "Influence of political movement on fields of study: Evidence from Hong Kong," European Journal of Political Economy, Elsevier, vol. 79(C).
    13. Hugh Cassidy & Amanda Gaulke, 2024. "The increasing penalty to occupation‐education mismatch," Economic Inquiry, Western Economic Association International, vol. 62(2), pages 607-632, April.
    14. Romauld Méango, 2023. "Identification of ex ante returns using elicited choice probabilities," Economics Series Working Papers 1007, University of Oxford, Department of Economics.
    15. d’Astous, Philippe & Shore, Stephen H., 2024. "Programs of study and earnings dynamics," Labour Economics, Elsevier, vol. 88(C).

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    More about this item

    Keywords

    Demand for schooling; Educational economics; Human capital; School choice; Major choice; Labor income risk;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • I20 - Health, Education, and Welfare - - Education - - - General

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