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Uncertainty about Future Income: Initial Beliefs and Resolution During College

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Abstract

Uncertainty about future income plays a conceptually important role in college decisions. Unfortunately, characterizing how much earnings uncertainty is present for students at college entrance and how quickly this uncertainty is resolved has proven to be difficult. This paper takes advantage of unique expectations data from the Berea Panel Study to provide new evidence about this issue. We characterize initial uncertainty using survey questions that elicit the entire distribution describing one’s beliefs about future earnings at an ideal time - immediately before students began their first year courses. We characterize the amount of uncertainty that is resolved during college by taking advantage of the longitudinal nature of the expectations data. Taking advantage of a variety of additional survey questions, we provide evidence about how the resolution of income uncertainty is influenced by factors such as college GPA and college major, and also examine why much income uncertainty remains unresolved at the end of college.

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  • Yifan Gong & Todd Stinebrickner & Ralph Stinebrickner, 2018. "Uncertainty about Future Income: Initial Beliefs and Resolution During College," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20185, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    • Handle: RePEc:uwo:hcuwoc:20185
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    Cited by:

    1. Gong, Yifan & Stinebrickner, Ralph & Stinebrickner, Todd, 2022. "Marriage, children, and labor supply: Beliefs and outcomes," Journal of Econometrics, Elsevier, vol. 231(1), pages 148-164.
    2. Jane Greve & Morten Saaby & Anders Rosdahl & Vibeke Tornhøj Christensen, 2021. "Uncertain occupational expectations at age 19 and later educational and labour market outcomes," LABOUR, CEIS, vol. 35(2), pages 163-191, June.
    3. Jackson Bunting & Paul Diegert & Arnaud Maurel, 2024. "Heterogeneity, Uncertainty and Learning: Semiparametric Identification and Estimation," Papers 2402.08575, arXiv.org.
    4. Tsiaplias, Sarantis, 2020. "Time-Varying Consumer Disagreement and Future Inflation," Journal of Economic Dynamics and Control, Elsevier, vol. 116(C).
    5. Arpita Patnaik & Matthew J. Wiswall & Basit Zafar, 2020. "College Majors," NBER Working Papers 27645, National Bureau of Economic Research, Inc.
    6. Juerg Schweri, 2021. "Predicting polytomous career choices in healthcare using probabilistic expectations data," Health Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 544-563, March.
    7. Pamela Giustinelli, 2022. "Expectations in Education: Framework, Elicitation, and Evidence," Working Papers 2022-026, Human Capital and Economic Opportunity Working Group.
    8. Yifan Gong & Todd Stinebrickner & Ralph Stinebrickner, 2020. "Perceived and actual option values of college enrollment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(7), pages 940-959, November.
    9. Oliver Cassagneau-Francis, 2021. "The Role of Earnings, Financial, and other Factors in University Attendance," SciencePo Working papers Main hal-04067182, HAL.
    10. Crossley, Thomas F. & Gong, Yifan & Stinebrickner, Ralph & Stinebrickner, Todd, 2022. "The ex post accuracy of subjective beliefs: A new measure and decomposition," Economics Letters, Elsevier, vol. 210(C).

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    More about this item

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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