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Educational choice, initial wage and wage growth.
- Source :
- Empirical Economics; Sep2024, Vol. 67 Issue 3, p1235-1274, 40p
- Publication Year :
- 2024
-
Abstract
- We study the effects of expected initial wages, expected wage growth, and observed and unobserved heterogeneity in the choice of college major in a sample of American college graduates. We propose a three-stage empirical model that relates future earnings to individual choices. In the first stage, starting from revealed choices, observed wages, and life-cycle wage profiles, we estimate the expectation on initial wages and wage growth from the individual point of view, where the panel structure of the data allows us to produce estimates corrected for self-selection bias. We find substantial differences in expected real wages and expected real wage growth between majors and that both characteristics of life cycle earnings influence major choice. Our parametric models show a strong correlation between salary trends and major choice, whereas semiparametric models yield less reliable results. We interpret our results as being consistent with agents being rational and as a validation for our estimation strategy based on counterfactual imputation. [ABSTRACT FROM AUTHOR]
- Subjects :
- WAGE increases
REAL wages
INCOME inequality
LIFE cycles (Biology)
COLLEGE choice
Subjects
Details
- Language :
- English
- ISSN :
- 03777332
- Volume :
- 67
- Issue :
- 3
- Database :
- Complementary Index
- Journal :
- Empirical Economics
- Publication Type :
- Academic Journal
- Accession number :
- 179295894
- Full Text :
- https://doi.org/10.1007/s00181-024-02580-5