Job Market Paper

This paper studies the implications of short-term costs imposed by pricing structures on college major choice and the role of financial constraints. I examine the effect of major-specific pricing policies on major choice and on the distribution of low-income students across majors. Using rich student level administrative data from the University of Wisconsin-Madison, I implement a difference-in-difference strategy that exploits the introduction of a surcharge policy in the Engineering and Business programs. I find that raising the program specific tuition by $1000 (11%) decreases the probability of graduating in Business by 33% and in Engineering by 12% and this is driven by the response of low-income students. I then exploit this price variation to identify the labor market returns to these majors. Using these estimates, I find that students are highly responsive to prices despite large earnings losses from switching majors. Motivated by the empirical evidence, I develop and estimate a structural model of college major choice that quantifies the importance of direct price effects and credit constraints. The model estimates suggest that credit constraints rationalize the sensitivity of students to changes in pricing structures. Complementing price differentials with expansions of borrowing limits and means-tested subsidies can minimize the distortion created by pricing. Relaxing borrowing limits allows students to borrow against future income to pay higher tuition and means-tested grants decrease the net price of the major for low-income students.

Publication

The Role of Heterogeneous Risk Preferences, Discount Rates and Earnings Expectations in College Major Choice [Accepted, Journal of Econometrics], NBER Working Paper No. 26785 (Previous Version) with Joanna Venator, Matthew Wiswall and Basit Zafar

In this paper, we estimate a rich model of college major choice using a panel of experimentally derived data. Our estimation strategy combines two types of data: data on self-reported beliefs about future earnings from potential human capital decisions, and survey-based measures of risk and time preferences. We show how to use this data to identify a general life-cycle model, allowing for rich patterns of heterogeneous beliefs and preferences. Our data allow us to separate perceptions about the degree of risk or perceptions about the current versus future payoffs for a choice from the individual's preference for risk and patience. Comparing our estimates of the general model to estimates of models which ignore heterogeneity in risk and time preferences, we find that these restricted models are likely to overstate the importance of earnings to major choice. Additionally, we show that while men are less risk averse and patient than women, gender differences in non-pecuniary tastes, rather than gender differences in risk aversion and patience over earnings, are the primary driver of gender gaps in major choice.


Working Papers

This article reviews the recent literature on the determinants of college major choices. We first highlight long-term trends and persistent differences in college major choices by gender, race, and family background. We then review the existing research in six key areas: expected earnings and ability sorting, learning, subjective expectations, non-pecuniary considerations, peer and family effects, and supply side factors. We examine and compare the various approaches employed by previous research and highlight key areas for future research.

*COVID RELEVANT* Valuation of Work from Home Jobs: Selection, Preferences and Gender [Draft ]

This paper characterizes remote work or work-from-home (WFH) jobs and quantifies the welfare gain from these work arrangements. Using data from the ATUS and CPS, I develop a measure of locational flexibility at work. Motivated by the patterns of sorting in the data, I then develop and estimate a generalized model of sectoral choice with amenities. The structural estimates point to differences by gender in the returns to education and experience, compositional differences as well as preferences. I also find that the gender wage gap persists in remote work at 3.9 dollars (without controlling for selection), most of which is determined by differences in the returns to observable characteristics. With the help of this framework, I estimate the willingness-to-pay (WTP) for these jobs. I find that women have higher valuation (WTP) of these jobs than men. On average, women are willing to pay 3.8 percent of the average hourly wage for locationally flexible jobs whereas men have a low willingness to pay (0.6 percent of hourly wage) for these jobs. Further, college graduates (both men and women) value remote work more than workers without college education. College educated women in particular value remote work the most at 4.3 percent of the hourly wage. The estimates also suggest that there may be specialisation within the household. Mothers who have more children have a higher valuation for remote work whereas fathers have a lower valuation.

Can Second Chances for Inmates Work? Evidence from the Second Chance Pell Pilot Program [Draft Available upon request], with Andra Ghent

We evaluate the effects of the Second Chance Pell pilot program on the outcomes of Wisconsin inmates. The US Department of Education announced the Second Chance Pell pilot program on July 7, 2015. The program, now in its fourth year of operation, permits inmates to pursue post secondary education from behind bars. To control for non-random selection into post secondary education by inmates, we use difference-in-difference approaches to assess how the program affects the rate of recidivism for recently released inmates. We find that recently released inmates housed in facilities eligible for the program had 18-month recidivism rates approximately four percentage points ( ~ 12 %) lower than comparable inmates housed in institutions without access to the program.

Work in Progress

“Gender Gaps in Economics Majors” , with Gwyn Pauley , Joanna Venator and Matthew Wiswall

Gender is Not Enough: The Impacts of Alumni Speakers on Interest in Economics”, with Gwyn Pauley , Joanna Venator and Matthew Wiswall

"The Effect of Immigration Policy on College Major Choice" with Hans Schwarz, and Sandra Spirovska