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Uncertainty about Future Income: Initial Beliefs and Resolution During College

Yifan Gong, Ralph Stinebrickner, Todd R. Stinebrickner

NBER Working Paper No. 25485
Issued in January 2019
NBER Program(s):Economics of Education, Labor Studies

We use unique data from the Berea Panel Study to characterize how much earnings uncertainty is present for students at college entrance and how quickly this uncertainty is resolved. We characterize uncertainty using survey questions that elicit the entire distribution describing one’s beliefs about future earnings. Taking advantage of the longitudinal nature of the expectations data, we find that roughly two-thirds of the income uncertainty present at the time of entrance remains at the end of college. 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. This paper also contributes to a literature interested in understanding the relative importance of uncertainty and heterogeneity in determining observed earnings distributions.

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Document Object Identifier (DOI): 10.3386/w25485

Published: Yifan Gong & Todd Stinebrickner & Ralph Stinebrickner, 2019. "Uncertainty about future income: Initial beliefs and resolution during college," Quantitative Economics, vol 10(2), pages 607-641. citation courtesy of

 
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