The Effect of the Business Cycle on Freshman Major Choice

During economic downturns, college students can alter their postsecondary education decisions through several channels. This paper focuses on college major choice, one higher education decision that might change after a recession, and one that few researchers have explored. Due to data limitations, previous research is unable to provide definitive results on if, or how, matriculating freshmen change college majors during recessions. The data used for this study assuages those limitations and is obtained from the "Freshman Survey," administered by the Cooperative Institutional Research Program (CIRP). Building on what is already known about how students choose college majors and how they respond to information shocks, the theoretical model proposes that during economic downturns, students will switch to fields with higher relative wage and employment opportunities. First, this study finds that freshmen are less likely to have undeclared intended majors after recessions. Then, a multinomial logit empirical technique strongly suggests that after economic downturns, those who declare intended majors are more likely to choose ones that offer higher wages and provide more job security, like Technology, Business, Engineering and Health. University administrators can apply this empirical model to their own institutional-level data. In the presence of substantial budget cuts, administrators can anticipate the majors that will require more resources and those from which they can transfer resources to efficiently meet student demand. More broadly, these conclusions offer better information on labor force composition after recessions, which can enhance forecasting of likely shortages and surpluses in the labor market.