We exploit admission lotteries to estimate the returns to medical school in the Netherlands. Using data from up to 22 years after the lottery, we find that in every single year after graduation doctors earn at least 20 percent more than people who end up in their nextbest occupation. Twenty-two years after the lottery the earnings difference is almost 50 percent. Only a small fraction of this difference can be attributed to differences in working hours and human capital investments. The returns do not vary with gender or ability, and shift the entire earnings distribution. (JEL D44, I11, I26, J24, J31, J44) E arnings do not only vary with level of schooling but also with field of study. For example, in the US median annual earnings of people with a bachelor's degree in engineering equal US$92,000 in 2011, while median annual earnings for people with a bachelor's degree in education equal US$51,000 (Ryan 2012). Yet, while a large literature deals with the causal effect of the level of schooling on earnings, little is known about the causal effects of field of study on earnings (Altonji, Blom, and Meghir 2012). Do people with an engineering degree earn so much more than people with an education degree because they were exposed to a different curriculum, or does the observed earnings difference mainly reflect preexisting differences between people who chose different fields of study?
This article reports on a field experiment testing for sunk-cost effects in an education setting. Students signing up for extra-curricular tutorial sessions randomly received a discount on the tuition fee. The sunk-cost effect predicts that students who pay more will attend more tutorial sessions, with possibly beneficial effects on their performance. For our full sample, we find no support for this hypothesis, neither on attendance nor on performance. Results are consistent with a sunk-cost effect for the subsample of students who, based on hypothetical survey questions, are identified as sunk-cost prone. We do not find differential effects by students' income or parental contributions.
Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.
This paper studies mandatory job-search periods for welfare applicants. During this period the benefits application is put on hold and the applicant is obliged to make job applications. We combine a randomized experiment with detailed administrative data to investigate the effects of imposing a job-search period. We find strong and persistent effects on the probability to collect welfare benefits. The reduced benefits are fully compensated by increased earnings from work. Furthermore, we do not find evidence of adverse consequences for the most vulnerable applicants.Our results therefore suggest that a job-search period is an effective instrument for targeting welfare-benefits applicants. JEL-codes: C21, C93, I38, J64, J08
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