Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/114034
Authors: 
Blom, Erica
Cadena, Brian C.
Keys, Benjamin J.
Year of Publication: 
2015
Series/Report no.: 
IZA Discussion Papers 9167
Abstract: 
This paper examines the relationship between individuals' personal exposure to economic conditions and their investment choices in the context of human capital. Focusing on bachelor's degree recipients, we find that birth cohorts exposed to higher unemployment rates during typical schooling years select majors that earn higher wages, that have better employment prospects, and that more often lead to work in a related field. Much of this switching behavior can be considered a rational response to differences in particular majors' labor market prospects during a recession. However, higher unemployment leads to other meaningful changes in the distribution of majors. Conditional on changes in lifetime expected earnings, recessions encourage women to enter male-dominated fields, and students of both genders pursue more difficult majors, such as STEM fields. These findings imply that the economic environment changes how students select majors, possibly by encouraging them to consider a broader range of possible degree fields. Finally, in the absence of this compensating behavior, we estimate that the average estimated costs of graduating in a recession would be roughly ten percent larger.
Subjects: 
college major
business cycle
human capital investment
STEM majors
gender differences
JEL: 
E32
I23
J22
J24
Document Type: 
Working Paper

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