Séminaire

Ex Ante Returns and Occupational Choice

Arnaud Maurel (Duke University)

9 mai 2017, 15h30–17h00

Salle MS 001

Econometrics and Empirical Economics Seminar

Résumé

We show that data on subjective expectations, especially on outcomes from counterfactual choices and choice probabilities, are a powerful tool in recovering ex ante treatment effects as well the relationship between individual choices and expected returns to treatment. In this paper we focus on the choice of occupation, and use elicited beliefs from a sample of male undergraduates at Duke University. By asking individuals about potential earnings associated with counterfactual choices of college majors and occupations, we can recover the distribution of the ex ante returns to particular occupations, and how these returns vary across majors. We also examine how students update their beliefs over the course of college. We find large differences in expected earnings across occupations, and substantial heterogeneity across individuals in the corresponding ex ante returns. Our results also point to the existence of sizable complementarities between some college majors and occupations. Finally, we find clear evidence of sorting on expected returns, with the ex ante returns measured while the individuals were still in college being very informative about both their actual occupational choices and their subsequent earnings.