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Economics and Major Selection

by Tod Massa 27. July 2018 17:55

So, rather than write about Gainful Employment, which I expect I will save until next week, I want to highlight a series of tweets coming out from Joshua Goodman as he attended the National Bureau of Economic Research Summer Institute. You can find them here.  

 

This tweet is of particular interest:

 

 

 

The study focused on a set of science and engineering majors and looked at the effects of "superstar firms" (ie. Mark Zuckerberg/Facebook as one of the world's richest people) and how media coverage/awareness of such drives increases in those majors. The summary of findings includes these bits:

Positive salient, extreme events in an industry are associated with more college students choosing to major in related fields

  • as proxied by cross-sectional skewness in stock returns
  • also skewness in favorable news coverage

Response to superstar firms has adverse impact on career outcomes

  • lower average wage earned by entry-level employees when additional students enter the job market
  • no significant change in new hires I adverse effects last for years, even decades

Also exploit structural breaks in industry valuation in the tech bubble to provide more evidence in support of a labor supply channel 

In other words, information regarding highly skewed outcomes towards wealth can drive more students into that major, increasing supply of workers while demand remains unchanged, thus driving wages down. The effects of decreased wages can last for years, even decades.

Fascinating, right? I love seeing research like this. (The two other studies referenced in series of tweets are also fascinating.)


 

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