Essays in Labor Economics

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This dissertation analyzes how individuals choose college majors. The choice of college major is treated as one made under uncertainty. Understanding any decision under uncertainty requires one to study how expectations and preferences are used to make the choice. However, since observed choices may be consistent with many combinations of expectations and preferences, I instead collect a unique panel dataset of Northwestern students which contains their subjective expectations about choice-specific outcomes. Chapter 1 estimates the decision rule of college major choice by combining subjective expectations with choice data. I obtain three main results: (1) non-pecuniary outcomes explain nearly half of the choice, (2) males and females are similar in their preferences for outcomes in college but differ in their preferences for outcomes in the workplace, and (3) the gender gap in major choice is mainly because of gender differences in beliefs about enjoying studying different majors, and gender differences in preferences. Chapter 2, motivated by the fact that there is a positive correlation between one's own major and that of their parents and elder siblings, outlines a model in which conformity in actions may arise from learning about the norm, or from image-related concerns (social influence). To empirically disentangle the two, I use the fact that image-related concerns can only be present if actions are publicly observable. The model predictions are tested in a charitable contribution experiment in which the actions and identities of the subjects are unmasked in a controlled and systematic way. Both learning and social influence seem to play an important role in the choices of the subjects. Chapter 3 focuses on how individuals revise expectations, and analyzes perceptions of discrimination associated with major choice. Changes in expectations are found to vary in sensible ways. Priors for outcomes realized in college are found to be fairly precise, while students seem to gain valuable information about outcomes that are realized in the workplace. Perceptions of being treated poorly in the jobs in the various majors are found to be negatively correlated with the fraction of one's own gender in that field of study.

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