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Recovering Ex Ante Returns and Preferences for Occupations Using Subjective Expectations Data

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Date
2014-10-01
Authors
Arcidiacono, Peter
Hotz, V Joseph
Maurel, Arnaud
Romano, Teresa
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Abstract
We show that data on subjective expectations, especially on outcomes from counterfactual choices and choice probabilities, are a powerful tool in recovering ex ante treatment effects as well as preferences for different treatments. In this paper we focus on the choice of occupation, and use elicited beliefs from a sample of male undergraduates at Duke University. By asking individuals about potential earnings associated with counterfactual choices of college majors and occupations, we can recover the distribution of the ex ante monetary returns to particular occupations, and how these returns vary across majors. We then propose a model of occupational choice which allows us to link subjective data on earnings and choice probabilities with the non-pecuniary preferences for each occupation. We find large differences in expected earnings across occupations, and substantial heterogeneity across individuals in the corresponding ex ante returns. However, while sorting across occupations is partly driven by the ex ante monetary returns, non-monetary factors play a key role in this decision. Finally, our results point to the existence of sizable complementarities between college major and occupations, both in terms of earnings and non-monetary benefits.
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Journal article
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https://hdl.handle.net/10161/13088
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Scholars@Duke

Maurel

Arnaud Maurel

Associate Professor of Economics
Professor Maurel’s research focuses on labor economics, economics of education, and microeconometrics. Most of his non-methodological work lies at the intersection between the economics of education and labor economics, with a focus on post-secondary education demand and occupational choices. On the methodological side, his research is concerned with the identification and estimation of selection and treatment effect models, and the combination of subjective expectations and observati
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