Inside the Black Box of Skill Formation: Determinants and Outcomes of Field of Study Choices

Choosing field of study is potentially as important as the decision to take higher education or not. An example is that income differences between people with different educational orientation may be as large as differences between people with / without higher education (Altonji et al., 2012). Field of study can also contribute to inequality between different groups of individuals. One example of this is that even though women in many countries have passed men in terms of participation in higher education, income differences between sex are still significant (Weichselbaumer and Winter-Ebmer, 2005). An explanation for this persistent income gap may be that men and women choose different disciplines. Despite the economic and social importance of education, there is relatively little research on the underlying causes of different individuals choosing different disciplines and how these choices affect their later outcomes. This project contributes in several ways to increase the nowledge about this. We start out quite generally by looking at the returns to different fields of study, and find that this is the case. The estimated return also corresponds to the fact that individuals opt for fields where they have comparative advantages. Furthermore, we study whether traveling distance to higher education institutions offering matter for choice of fields. More persistently, we study how the choice of educational field is related to the establishment of new colleges in Norway in the second half of the 20th century. From 1955 to 1989, a total of 33 new colleges were established in regions where there had previously been no such higher education programs. We find that the choice of the types of education that was largely covered by the reform (nursing, engineering and finance / administration) increased significantly where the services were established. However, we find no indication of an increase in income, which indicates that the change in the population's educational composition as a result of the college reform occurred on the intensive margin (choice of field of study was changed) rather than on the extensive margin (that more people took education, or that the course of education became longer).

In total the project has produces 6 papers and one master thesis. One is published in one of the best journals whereas another one has revise and resubmit in a top field journal. The remaining papers are also in the pipeline and will hopefully be published. We believe the papers funded in this project have great potential to contribute to a better understanding of how individuals make choices for higher education. Moreover, this is a large and complicated area of research and much more work is needed in order to design effective policy measures.

Between 1995 and 2000, the entry rates to post-secondary education increased from 37 to 62 percent on average across OECD countries (OECD, 2012). One of the choices that virtually all these students had to make was to pick a field of study or college majo r.1 For an individual the field of study choice is potentially as important as the decision to enroll in higher education, since the earnings differences we observe across fields rival college earnings premiums (Altonji et al., 2012). Field of study is a lso important source of inequality. Gemici and Wiswall (2014) find that over a period of rising (earnings) inequality in the 1980s, compositional changes in field of study account for approximately 20-40 percent of the increase in average earnings for col lege graduates and 10-30 percent of the increase in earnings dispersion among college graduates. Field of study also contributes to between-group inequality. One example is the gender wage gap. Although women in many coun- tries have surpassed men in atte ndance at higher education, earnings differentials between men and women are still pronounced (Weichselbaumer and Winter-Ebmer, 2005). One explanation for the persistence of the gender wage gap lies in different field of study choices across the genders, as men and women are still concentrated in different occupations (e.g. Machin and Puhani, 2003). Despite the economic and social importance of field of study, there is relatively little evidence on why individuals choose different fields, and how those c hoices affect their later outcomes. This project contributes to this lacuna in several ways.