Labor market returns to college major specificity
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This paper explores the definition and measurement of college major specificity and estimates its labor market return over a worker’s life cycle. After reviewing the variety of measures which have been used to measure specialization, we propose a new approach: a Theil measure based on the transferability of skills across occupations. We calculate and compare representative measures using data from the American Community Survey, National Longitudinal Survey of Youth, and the Baccalaureate and Beyond. We then use these measures to estimate the return to specialized higher education. Our consistent finding is that the most "general" majors are the ones that pay off the most over time. While there is an initial earnings premium to majors with a tight connection to the labor market and to those classified as "vocational", this fades by age 30. Meanwhile, majors that teach versatile, transferable skills earn the most at every age. Employment returns are largely consistent with these earnings estimates. While vocational majors display a persistent employment premium over the life cycle, most other measures suggest that graduates from general majors work more hours, are more likely to be employed, and are more likely to be employed full time. Overall, major specificity explains 22% of the variation across majors in earnings and 28% of the variation in work hours.
Leighton , M & Speer , J 2017 ' Labor market returns to college major specificity ' School of Economics and Finance Discussion Paper , no. 1709 , University of St Andrews , St Andrews .
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(c) 2017 the authors
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