Essays in Education Economics

This dissertation contains three chapters that explore various aspects of the economics of education, with a focus on higher education. In particular, the first two chapters deal with college major as it relates to earnings, occupational choice, and high school curriculum, while the third discusses the relationship between college-student match quality and the drop-out decision. How do students choose college majors? This question matters both for researchers seeking to understand educational investment decisions and for policymakers attempting to promote growth in certain fields. In the first chapter, I focus on the role of labor market conditions at the time students are choosing their field of study. First, I examine the impact of major-specific labor market variables, as measured by wages and unemployment rates. Second, I ask how these responses have been mediated by time and by aggregate economic conditions, as measured by the overall unemployment rate. Third, I examine how the types of majors students choose vary with the overall unemployment rate and with the college wage premium. To answer the first of these questions, I aggregate individual choices and use longitudinal and cross-sectional variation induced by demand shocks to estimate a set of major-specific labor supply equations. Combining several datasets to analyze the choices of sophomores from 1976 to 2006, I find relatively small supply elasticities with respect to major-specific wages: a ten percent increase in the wage increases the share of students in that major by 0.16% for men and by 0.65% for women. These labor supply elasticities were substantially higher in the 1970s and have declined over time, likely due to changes in the composition of students attending college. Moreover, these elasticities are higher when overall levels of unemployment are high. Furthermore, I find that when unemployment rates are high, students are more likely to choose majors that are better-paying, are more difficult, and have more math, science, and business content. Since standard models predict that students should respond to major-specific wage and unemployment rates rather than general conditions, these findings are somewhat surprising. Tightened financial constraints and heightened awareness of differences in economic returns during recessions are possible explanations. The second chapter is joint with Joseph Altonji and Costas Meghir. Motivated by the large differences in labor market outcomes across college majors, we survey the literature on the demand for and return to high school and postsecondary education by field of study. We combine elements from several papers to provide a dynamic model of education and occupation choice that stresses the roles of the specificity of human capital and uncertainty about preferences, ability, education outcomes, and labor market returns. The model implies an important distinction between the ex ante and ex post returns to education decisions. We also discuss some of the econometric difficulties in estimating the causal effects of field of study on wages in the context of a sequential choice model with learning. Finally, we review the empirical literature on the choice of curriculum and the effects of high school courses and college major on labor market outcomes. The third chapter explores the relationship between the match quality and the drop-out decision. In particular, I relate the number of college applications a student submits and her survival probability in the fourth semester of college. Applying to a greater number of colleges should increase the likelihood of finding a good match and thus decrease the likelihood of dropout. Using a Cox proportional hazard model, I find that, controlling for academic aptitude, non-cognitive abilities, and background variables, a higher number of applications is correlated with a decreased likelihood of dropout by semester four. However, when I apply the Altonji-Elder-Taber method for assessing the degree of selection on unobservables relative to observables, I find that omitted variables may be a serious concern. This suggests that set of control variables chosen, while apparently rich, does not adequately capture a student's college-going decisions. [The dissertation citations contained here are published with the permission of ProQuest LLC. Further reproduction is prohibited without permission. Copies of dissertations may be obtained by Telephone (800) 1-800-521-0600. Web page: http://www.proquest.com/en-US/products/dissertations/individuals.shtml.]