College Choice

with Andres Barrios-Fernandez, Marin Drlje, Joshua Goodman, Michael Hurwitz, Dejan Kovac, Christine Mulhern, Christopher Neilson, and Jonathan Smith

Family and social networks are widely believed to influence important life decisions, but causal identification of those effects is notoriously challenging. Using data from Chile, Croatia, Sweden, and the United States, we study within-family spillovers in college and major choice across a variety of national contexts. Exploiting college-specific admissions thresholds that directly affect older but not younger siblings’ college options, we show that in all four countries a meaningful portion of younger siblings follow their older sibling to the same college or college-major combination. Older siblings are followed regardless of whether their target and counterfactual options have large, small, or even negative differences in quality. Spillover effects disappear, however, if the older sibling drops out of college, suggesting that older siblings’ college experiences matter. That siblings influence important human capital investment decisions across such varied contexts suggests that our findings are not an artifact of particular institutional detail but a more generalizable description of human behavior. Causal links between the postsecondary paths of close peers may partly explain persistent college enrollment inequalities between social groups, and this suggests that interventions to improve college access may have multiplier effects.

Universitetsläraren, Aftonbladet, Animated explainer - Econimate

University graduates are two to five times as likely to hold a degree in the field that their parents graduated from. To estimate how much of this association is caused by the education choices of parents, I exploit admission thresholds to university programs in a regression discontinuity design. I study individuals who applied to Swedish universities between 1977 and 1992 and evaluate how their enrollment in different fields of study increases the probability that their children later study the same topic. I find strong causal influence. At the aggregate level, children become 73% more likely to graduate from a field that their parent has quasi-randomly enrolled in. The effect is always positive, but varies in size across fields. Engineering, medicine, social science, and business exhibit the largest effects. For these fields, parental enrollment increases child graduation rates with between 6.0 and 9.5 percentage points. I find little evidence for comparative advantage being the key driver of field inheritance. Parental field enrollment does not increase subject-specific skills in primary school, nor do labor market returns differ by access to parents with the same degree. Rather, parents seem to function as role models, making their own field choice salient. This is indicated by the fact that children are more likely to follow parents with the same gender, and that parental enrollment in gender incongruent fields is more impactful.

Using university admission cutoffs that generate exogenous variation in college-major choices, we provide causal evidence that enrollment in a business or economics program leads individuals to invest significantly more in the stock market, earn higher portfolio returns, and ultimately accumulate higher levels of wealth later in life. Underlying these effects, beyond differences in risk-taking, innate ability, labor market outcomes, or scale effects, is the enhanced ability of business educated individuals to acquire and process economic information and make informed investment decisions. Early investments in financial literacy thus play an important role in generating higher returns that significantly alter individuals' life-cycle wealth profiles.