Three Essays on Career and Education Choices.

Early in life, people make education and career decisions that affect their income and wellbeing for the rest of their lives. Understanding how individuals make these human capital investments helps economists evaluate the efficiency and equity of individual sorting into schools and occupations and predict the pace of labor market adjustment following changes in labor demand. The second chapter of this dissertation estimates the relationship between earnings uncertainty and expected earnings across occupations. Rational, risk-averse workers require higher average compensation to enter occupations where they face greater uncertainty about lifetime earnings. Compensation for earnings risk explains 17% of the differences in average earnings across occupations, but only a small share of total earnings inequality. Lifetime earnings risk, which is largely uninsurable, creates inefficiencies in the labor market: products become more expensive to cover this compensation, but workers are no happier than they would be with lower, safer earnings. Moreover, workers sort into occupations partially based on their preferences for risk, rather than their relative skills. The third chapter estimates the responsiveness of college enrollment decisions to changes in the relative average earnings of workers with and without a college degree. Growth in the college earnings premium can explain more than half of the 10 percentage point rise from 1980 to 2002 in four-year college enrollment for men. As the relative supply of workers with a college degree rises, some of the recent rise in their relative earnings should be reversed. The fourth chapter studies the causes of mismatch between student ability and college quality, measuring college quality with peer student ability and resources per student. Additional wealth and information about college lower the probability that a student will attend a college of low quality relative to their ability and raise the probability that she will attend a relatively high quality college. Programs that provide information about college to less informed students may increase the equity of student sorting into colleges. However, if all well-informed students seek to attend the highest quality colleges, only increasing the overall quality of the college stock can improve welfare.PhDEconomicsUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/93822/1/ewdillon_1.pd