Pricing, Income and College Major Choice

  • 研討會日期 : 2021-01-14
  • 時間 : 10:30
  • 主講人 : Ms. Arpita Patnaik
  • 主持人 : Professor Tzu-Ting Yang
  • 地點 : online
  • 演講者簡介 : Ms. Patnaik will receive her Ph.D. in Economics from University of Wisconsin–Madison in 2021. Her research interests are Labor Economics, Economics of Education, Public Economics, and Applied Microeconomics. She is applying for a position of the Institute of Economics, Academia Sinica now.
  • 演講摘要 : This paper studies the implications of short-term costs imposed by pricing structures on college major choice and the role of financial constraints. I examine the effect of major-specific pricing policies on major choice and on the distribution of low-income students across majors. Using rich student level administrative data from the University of Wisconsin-Madison, I implement a difference-in-difference strategy that exploits the introduction of a surcharge policy in the Engineering and Business programs. I find that raising the program specific tuition by $1000 (11%) decreases the probability of graduating in Business by 33% and in Engineering by 12%and this is driven by the response of low-income students. I then exploit this price variation to identify the labor market returns to these majors. Using these estimates, I find that students are highly responsive to prices despite large earnings losses from switching majors. Motivated by the empirical evidence, I develop and estimate a structural model of college major choice that quantifies the importance of direct price effects and credit constraints. The model estimates suggest that credit constraints rationalize the sensitivity of students to changes in pricing structures. Complementing price differentials with expansions of borrowing limits and means-tested subsidies can minimize the distortion created by pricing. Relaxing borrowing limits allows students to borrow against future income to pay higher tuition and means-tested grants decrease the net price of the major for low-income students.