The Role of Heterogeneous Risk Preferences, Discount Rates, and Earnings Expectations in College Major Choice / Arpita Patnaik, Joanna Venator, Matthew Wiswall, Basit Zafar.

Format:

Book

Author/Creator:

Patnaik, Arpita.

Contributor:

National Bureau of Economic Research.

Venator, Joanna.

Wiswall, Matthew.

Zafar, Basit.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26785.

NBER working paper series no. w26785

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

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 these 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 expectations about own-earnings, risk aversion, and patience cannot explain gender gaps in major choice.

Notes:

Print version record

February 2020.