Wednesday, November 25, 2009

Early and late matching to career choices

A recent NBER paper by Ofer Malamud finds that students (in Scotland) who get to choose their academic specialty later in their educational careers have fewer changes of career than students who must choose earlier (in England). So, it provides some evidence about why unraveled markets are sometimes inefficient, i.e. on how early matching can result in lower match quality.

Discovering One's Talent: Learning from Academic Specialization by Ofer Malamud

Abstract: In addition to providing useful skills, education may also yield valuable information about one's tastes and talents. This paper exploits an exogenous difference in the timing of academic specialization within the British system of higher education to test whether education provides such information. I develop a model in which individuals, by taking courses in different fields of study, accumulate field-specific skills and receive noisy signals of match quality to these fields. Distinguishing between educational regimes with early and late specialization, I derive comparative static predictions about the likelihood of switching to an occupation that is unrelated to one's field of study. If higher education serves mainly to provide specific skills, the model predicts more switching in a regime with late specialization because the cost of switching is lower in terms of foregone skills. Using survey and administrative data on university graduates, I find that individuals from Scotland, where specialization occurs relatively late, are less likely to switch to an unrelated occupation compared to their English counterparts who specialize early. This implies that the benefits to increased match quality are sufficiently large to outweigh the greater loss in skills from specializing early, and thus confirms the important role of higher education in helping students discover their own tastes and talents.

An ungated version is here.

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