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Duke Economics Working Paper #02-26

Ability Sorting and the Returns to College Major


Peter Arcidiacono

Abstract

Large earnings and ability differences exist across majors. This paper seeks to estimate the monetary returns to particular majors as well as find the causes of the ability sorting across majors. In order to accomplish this, I estimate a dynamic model of college and major choice. Even after controlling for selection, large earnings premiums exist for certain majors. Differences in monetary returns explain little of the ability sorting across majors; virtually all ability sorting is because of preferences for particular majors in college and the workplace, with the former being larger than the latter.

Key Words: Dynamic Discrete Choice, Returns to Education, Human Capital

JEL: I21, C35, J24, D83

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