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

43 Pages Posted: 23 Oct 2014

See all articles by Peter Arcidiacono

Peter Arcidiacono

Duke University - Department of Economics; National Bureau of Economic Research (NBER)

V. Joseph Hotz

Duke University; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Arnaud Maurel

Duke University - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Teresa Romano

Goucher College

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Date Written: October 1, 2014

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.

Suggested Citation

Arcidiacono, Peter and Hotz, V. Joseph and Maurel, Arnaud and Romano, Teresa, Recovering Ex Ante Returns and Preferences for Occupations Using Subjective Expectations Data (October 1, 2014). Economic Research Initiatives at Duke (ERID) Working Paper No. 178, Available at SSRN: https://ssrn.com/abstract=2513389 or http://dx.doi.org/10.2139/ssrn.2513389

Peter Arcidiacono

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
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National Bureau of Economic Research (NBER) ( email )

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V. Joseph Hotz

Duke University ( email )

213 Social Sciences Building
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Durham, NC 27708
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919-660-1841 (Phone)
919-684-8974 (Fax)

HOME PAGE: http://www.econ.duke.edu/~vjh3

National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics ( email )

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Germany

Arnaud Maurel (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
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United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Teresa Romano

Goucher College ( email )

1021 Dulaney Valley Road
Baltimore, MD 21204-2794
United States

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