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Studying Economics Increases Wages a Lot

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By Alex Tabarrok. He is an economics professor at George Mason university.He discusses the key issue, causality. Does majoring in economics cause the higher salary? Or did smart people major in economics who would have made high salaries anyway?The study looked at students who just barely had a high enough GPA to qualify to major in econ and compared them to students who were just below the cutoff. So the two groups are very similar (meaning we have ceteris paribus conditions or holding all other factors constant).Here is the post from Dr. Tabarrok. The link he has at the end is also very interesting."Students who majored in economics earned median wages at the age of forty of ,000 in 2018. Students who majored in other social sciences earned only ,000. Why the big difference?

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By Alex Tabarrok. He is an economics professor at George Mason university.

He discusses the key issue, causality. Does majoring in economics cause the higher salary? Or did smart people major in economics who would have made high salaries anyway?

The study looked at students who just barely had a high enough GPA to qualify to major in econ and compared them to students who were just below the cutoff. So the two groups are very similar (meaning we have ceteris paribus conditions or holding all other factors constant).

Here is the post from Dr. Tabarrok. The link he has at the end is also very interesting.

"Students who majored in economics earned median wages at the age of forty of $90,000 in 2018. Students who majored in other social sciences earned only $65,000. Why the big difference? Selection or a causal effect of earnings? Zachary Bleemer and Aashish Mehta compare students at UCSC who just missed the grade cutoff to be able to major in economics with those who just made the grade. Making the grade causes a big increase in students choosing to major in economics and a big increase in their salaries by their mid-20s of about $22,000. Thus most or all of the observed differences in salaries by major appear to be causal. The increase in salary appears to be driven by a change in preferences that leads students with economics majors to specialize in high-wage industries.

Abstract: We investigate the wage return to studying economics by leveraging a policy that prevented students with low introductory grades from declaring the major. Students who barely met the GPA threshold to major in economics earned $22,000 (46%) higher annual early-career wages than they would have with their second-choice majors. Access to the economics major shifts students’ preferences toward business/finance careers, and about half of the wage return is explained by economics majors working in higher-paying industries. The causal return to majoring in economics is very similar to observational earnings differences in nationally representative data.

As I have written, College Majors Matter and by about as much as going to college!"

See also from Feb. of this year 33 of the Highest-Paying Majors You Can Choose in College.

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