Risky Business? The Effect of Majoring in Business on Earnings and Educational Attainment
One of the most important decisions a student can make during the course of his or her college career is the choice of major. The field of study a student selects translates directly into the types of skills and knowledge he or she will obtain during college, and it can influence the type of career chosen after postsecondary education ends. Business is one of the most popular majors in the US, accounting for 19% of all college degrees granted. We study the impact of choosing a business major using a regression discontinuity design that exploits GPA cutoffs for switching majors in some Texas universities. Even though nearly 60% of marginal business majors would have majored in a STEM field otherwise, we find large and statistically significant increases in earnings of 80% to 130% 12+ years after college entry, driven mainly by women. These are considerably larger than OLS estimates that condition on a rich set of demographic, high school achievement, and high school fixed-effects controls, which is consistent with students choosing majors based on comparative advantage. We do not find statistically significant effects of majoring in business on educational outcomes, except for positive effects on male 6-year graduation rates.
We gratefully acknowledge that this research was made possible through data provided by the University of Texas at Dallas Education Research Center. The conclusions of this research do not necessarily reflect the opinions or official position of the Texas Education Agency, the Texas Higher Education Coordinating Board, or the State of Texas. We would also like to thank Alyssa Carlson, Sara Muehlenbein, Katelyn Heath and Mark Lu for excellent research assistance. We are further grateful for generous financial support for this project provided by the Smith Richardson Foundation. Finally, we'd like to thank seminar participants at Association for Education Finance and Policy Annual Meeting, Association for Policy Analysis and Management International Meeting, Michigan State University, Teachers' College, University of Georgia, and University of Michigan for helpful comments and advice. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.