Becker Friedman Institute

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Risky Business? The Effect of Majoring in Business on Earnings and Educational Attainment

One of the most important decisions a student can make during the course of his or her college career is the choice of major. The field of study a student selects translates directly into the types of skills and knowledge he or she will obtain during college, and it can influence the type of career chosen after postsecondary education ends. Business is one of the most popular majors in the US, accounting for 19% of all college degrees granted. We study the impact of choosing a business major using a regression discontinuity design that exploits GPA cutoffs for switching majors in some Texas universities. Even though nearly 60% of marginal business majors would have majored in a STEM field otherwise, we find large and statistically significant increases in earnings of 80% to 130% 12+ years after college entry, driven mainly by women. These are considerably larger than OLS estimates that condition on a rich set of demographic, high school achievement, and high school fixed-effects controls, which is consistent with students choosing majors based on comparative advantage. We do not find statistically significant effects of majoring in business on educational outcomes, except for positive effects on male 6-year graduation rates.

Authors: 
Rodney J. Andrews, The University of Texas at Dallas
Scott Imberman, University of Houston
Michael Lovenheim, Cornell University
Publication Date: 
August, 2017
HCEO Working Groups: 
Publication Status: 
Document Number: 
2017-060
File Description: 
First version, July 2017