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

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.

Understanding Migration Aversion Using Elicited Counterfactual Choice Probabilities

“…We follow a growing literature that uses data on hypothetical choices and expectations of future choice decisions to estimate preferences (Blass, Lach, and Manski, 2010;Arcidiacono, Hotz, and Kang, 2012;van der Klaauw, 2012;Arcidiacono et al, 2014;Wiswall andZafar, 2015, 2018). 16 To our knowledge, ours is the first study to apply this approach to residential 16 Blass, Lach, and Manski (2010) estimate a model of residential electricity demand.…”

“…van der Klaauw (2012) estimates a model of occupational choice among teachers. Arcidiacono, Hotz, and Kang (2012); Arcidiacono et al (2014) and Wiswall and Zafar (2015) estimate preferences for choosing college majors and post-college occupations. Wiswall and Zafar (2018) estimate preferences for job characteristics.…”

“…This type of analysis has been successfully used in the industrial organization(Blass, Lach, and Manski, 2010) and labor and education literatures(Arcidiacono, Hotz, and Kang, 2012;Arcidiacono et al, 2014; Wiswall and Zafar, 2015, 2018), but not to our knowledge in the migration literature.3 Our hypothetical scenarios cover many of the proposed determinants of location choice and mobility, including income, housing costs and attributes, local amenities, and non-market factors such as proximity to family, agreeableness of local cultural norms, and psychological costs of moving.…”

Benefits to elite schools and the expected returns to education: Evidence from Mexico City

“…This descriptive evidence must be at least partly driven by individual and family characteristics associated with the selection of students into high schools, but it tends to confirm the causal estimates we obtained. Wiswall and Zafar (2015) and Arcidiacono et al (2014) have used data on expected returns to different college majors to investigate determinants of college majors and occupation choices respectively. In this spirit, we can provide observational evidence of the extent to which earnings expectations are associated with college attendance intentions and graduation.…”

Worker overconfidence: Field evidence and implications for employee turnover and firm profits

“… See Arcidiacono et al () and Wiswall and Zafar () for examples of recent papers. van der Klaauw () discussed incorporating subjective beliefs into dynamic structural models.…”