What Do Students Know about Wages? Evidence from a Survey of Undergraduates

The paper uses a survey to examine undergraduates' knowledge of salaries by type of education. Students' beliefs varied systematically with their year of study and personal background. The median student made (estimated) absolute errors of approximately 20%, but the mean signed error was only-6%. Regression analysis revealed links between students' knowledge of the labor market, and year of study, proximity of the occupation to the student's own field and parents' income. Over half of learning occurred during the fourth year. Logit analyses of students' use of information sources supported this conclusion. Implications for human capital theory are considered. I. INTRODUCTION How do people choose whether to attend college? Once in college, how do they choose a field? Despite the pivotal importance of education in labor economics, we know surprisingly little about how people make these decisions about schooling. Our ignorance is reflected by the fact that many empirical models of earni...