Programs of study and earnings dynamics

Abstract

University programs differ in the subsequent earnings processes of their enrollees, including many features that students might care about to differing degrees such as the level of average earnings, earnings growth, and volatility. Do the earnings features of a university program’s enrollees reflect the causal effect of enrolling in that program or the self-selection of students into that program? Would students experience a different earnings process if they enrolled in a different program of study? To estimate the causal impact of enrolling in a program of study on the enrollees’ future earnings process, we exploit a discontinuity built into the Danish national university admissions system, which provides quasi-random assignment of similar applicants to different programs. We leverage the rich cross-program variation in the enrollees’ future earnings processes to measure the impact of entering a program whose enrollees experience high earnings levels, growth, and volatility on their own subsequent earnings level, growth, and volatility. We find that a student’s subsequent earnings levels and volatility – but not their earnings growth – are caused by entering programs of study whose enrollees have those features.