New Approaches to Understanding Choice of Major.

• Author: Wiswall, Matthew J.

College major choice and its relationship to labor market outcomes has long been a topic of study for social scientists. Stretching back at least to the 1970s, researchers have recognized that the particular field, and not just the level of education, deserves attention. A number of studies have demonstrated that the choice of post-secondary field is a key correlate of future earnings, and that choice of college major may be an important factor in explaining earnings differences, in particular by gender. Beyond individual welfare, major choice affects the skill composition of the workforce, making an understanding of how these choices are affected by changes in skill demand and wages important to research on the dynamics in the overall economy.

Our recent work on college major choice is focused on identifying the importance of earnings to major choice, relative to any other nonpecuniary considerations. Across our work, we bring new approaches to this classic issue, including the collection of new survey data on college students' expectations about the consequences of majors on their own future earnings and other outcomes, including future labor supply, marriage, and fertility. We show how information interventions, lab experiments, and hypothetical/stated choice designs can supplement subjective expectations data to provide further evidence on the factors that affect choice of major. Although this work has used a sample of high-ability college students from a selective university, we demonstrate that the richness of our data collection brings important new insights into the choice of a major and serves as a model for subsequent work.

Earnings Beliefs

The standard economic literature on decisions made under uncertainty, such as occupational and educational choices, generally assumes that individuals, after comparing the expected outcomes from various choices, choose the option that maximizes their expected utility. In the absence of expectations data, assumptions have to be made on expectations to infer the decision rule, including assumptions about expectations for counterfactual choices--the majors not chosen by the student. Although previous studies allow varying degrees of individual heterogeneity in beliefs about future earnings, they typically assume that expectations are either myopic or rational and use realized choices and realized earnings to identify the choice model. This approach is problematic because observed choices and realized earnings can be consistent with several combinations of expectations and preferences.

We designed a survey of major-specific earnings expectations and fielded it to undergraduates at New York University. We distinguish between two kinds of beliefs: what we term self-beliefs concern how much each respondent expects to earn in the future if they were to complete their degree in each major category, while population beliefs concern the realized distribution--for example, beliefs about average earnings for past graduates in each major. Whether correct or not, self-beliefs are the bases of choices, and collecting this information allows us to robustly estimate the importance of earnings to college major choices, free from the bias of incorrectly assuming the wrong model of expectations. Population beliefs, on the other hand, may not be directly relevant at all to self-beliefs or choices, but they provide some indications of how well-informed...