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Investment over the Business Cycle: Insights from College Major Choice

Erica Blom^1,2; Brian C. Cadena^3,4; Benjamin J. Keys^5,6

¹ Urban Institute · ² IZA - Institute of Labor Economics · ³ University of Colorado Boulder · ⁴ University of Colorado System · ⁵ California University of Pennsylvania · ⁶ University of Chicago

How does personal exposure to economic conditions affect individual human capital investment choices? Focusing on bachelor’s degree recipients, we find that cohorts exposed to higher unemployment rates during typical schooling years select majors that earn higher wages, have better employment prospects, and lead to work in a related field. Conditional on expected earnings, recessions also encourage women to enter male-dominated fields, and students of both genders pursue more difficult majors. We conclude that economic environments change how students select majors, and we find evidence that students who respond to the business cycle enjoy earnings typical of their new majors.

DOI

10.1086/712611

Volume

39 (4)

Pages

1043-1082

Language

en

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BibTeX

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