Does it all start at home? The Educational Impact on Economic Choices

Forskningsenhed: CEBR

Danish news outlets regularly list and rank different educational programs based on their expected income after graduation.1 This is usually seen by parents and prospective students as an important source of information when choosing a field of study. In particular, some prospective students might face the difficult choice of applying to a major that they are highly interested in but that yields a low anticipated income, versus applying to a less desirable major that yields a higher anticipated income. Using such program rankings to choose a field of study assumes that income after graduation is a direct effect of studying a given major. In this study, we seek to test whether this assumption is valid. There are two potential reasons why an educational program could lead to higher future income. One reason is because students that enroll in the program have the innate ability to generate a high income; this is a selection effect that could be the result of attracting students with high IQ, good inter-personal skills, etc. Another reason is because students who graduate the program have acquired skills that are valuable in the job market; this is a causal effect that is the result of the field of study itself and the education acquired. If higher income after graduation mostly reflects a selection effect, students should be careful in choosing a field of study solely on the average income of its graduates; they should instead choose a field of study that closely matches their interest and skills, and public policy should aim at matching students to fields of study that fit their profile. If higher income reflects a causal effect from the program of study, students seeking to maximize future earnings should pay close attention to such rankings and public policy should aim at nudging such students towards high earning majors.

Read the full project description here