Returns to College Majors and General Equilibrium

Abstract

Why do selective universities not expand their number of slots, and how do the returns to degrees differ by program quality? Using Chilean administrative data on university admissions, enrollment, and earnings, we estimate the returns to crossing admission cutoffs and how they depend on the quality gap to the student’s next-best option, and the effect of program capacity on students who are not at the margin. We then build a general-equilibrium model of major choice in which expanding or discouraging majors moves wages for everyone, to study the benefit of an additional slot that schools do not internalize.

Agustin Diaz Casanueva

Senior Economist

I study how households make economic decisions about consumption, fertility, and labor supply in response to shocks and policy changes.