Presentation Title

Heterogeneous Skill Distribution and College Major: Evidence from PIAAC

Presenter Information

Kan YaoFollow

Faculty Mentor

Rodrigo Pinto

Start Date

18-11-2017 10:45 AM

End Date

18-11-2017 11:00 AM

Location

15-1822

Session

Social Science 3

Type of Presentation

Oral Talk

Subject Area

behavioral_social_sciences

Abstract

A large literature documents the uneven distribution of labor market outcomes across majors. Students in STEM (science, technology, engineering and mathematics) can earn more than their peers. This earnings gap can be attributed not only to the deferential educational resources investment but also to heterogeneous distribution of initial cognitive skills across majors. The author benefits from the rich data from the Programme for the International Assessment of Adult Competencies (PIAAC) to examine this earnings gap in the United Stated and the United Kingdom. Based on the author's findings, this paper establishes new facts that add to the understanding of how college field premiums are generated. Up to two-fifths of the field premiums can be explained due to self-selection of basic cognitive skills. Despite the largely isomorphic contributions of numeracy and literacy skills on choosing college field of study, the pricing of numeracy is much higher than literacy in the labor market.

Summary of research results to be presented

First of all, heterogeneity in cognitive skills affects people's college field choices. The increase in either numeracy or literacy shifts people away from fields such as education, humanities and arts, towards high-skill subjects, such as STEM majors. The one exception is for women regarding humanities and arts. The increase in numeracy skills shifts women away from humanities and arts while the increase in literacy skill shifts them towards. This striking similarity in effects of both skills strongly suggest that numeracy and literacy simply present different facets of the same latent cognitive trait.

Secondly, the observed field premium is masqueraded by the self-selection due to heterogeneous skill distribution. After controlling for numeracy skills, STEM premiums face up to two-fifths reduction. In other words, the returns to cognitive skills explain a sizable portion of STEM premiums and educational process in STEM does not provide as many monetary returns as observed. On the other hand, most non-STEM majors, except the field of social science, business and law, increase the relative premiums. I also find that the field premium of health and welfare is significant. That is, field premium is not merely generated via sorting people with high cognitive skills into more lucrative fields and awarding for their high skills. Large premiums do exist.

Furthermore, numeracy is found to be an important ability for labor market outcomes than literacy. My results suggests that numeracy skill is a better predictor of earnings than mathematics ability or literacy skills alone.

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Nov 18th, 10:45 AM Nov 18th, 11:00 AM

Heterogeneous Skill Distribution and College Major: Evidence from PIAAC

15-1822

A large literature documents the uneven distribution of labor market outcomes across majors. Students in STEM (science, technology, engineering and mathematics) can earn more than their peers. This earnings gap can be attributed not only to the deferential educational resources investment but also to heterogeneous distribution of initial cognitive skills across majors. The author benefits from the rich data from the Programme for the International Assessment of Adult Competencies (PIAAC) to examine this earnings gap in the United Stated and the United Kingdom. Based on the author's findings, this paper establishes new facts that add to the understanding of how college field premiums are generated. Up to two-fifths of the field premiums can be explained due to self-selection of basic cognitive skills. Despite the largely isomorphic contributions of numeracy and literacy skills on choosing college field of study, the pricing of numeracy is much higher than literacy in the labor market.