Large earnings and ability differences exist across majors. This paper seeks to estimate the monetary returns to particular majors as well as find the causes of the ability sorting across majors. In order to accomplish this, I estimate a dynamic model of college and major choice. Even after controlling for selection, large earnings premiums exist for certain majors. Differences in monetary returns explain little of the ability sorting across majors; virtually all ability sorting is because of preferences for particular majors in college and the workplace, with the former being larger than the latter.

We examine differences in minority science graduation rates among University of California campuses when racial preferences were in place. Less-prepared minorities at higherranked campuses had lower persistence rates in science and took longer to graduate. We estimate a model of students college major choice where net returns of a science major differ across campuses and student preparation. We find less-prepared minority students at top-ranked campuses would have higher science graduation rates had they attended lowerranked campuses. Better matching of science students to universities by preparation and providing information about students prospects in different major-university combinations could increase minority science graduation.

This paper addresses how changing the admission and financial aid rules at colleges affects future earnings. I estimate a structural model of the following decisions by individuals: where to submit applications, which school to attend, and what field to study. The model also includes decisions by schools as to which students to accept and how much financial aid to offer. Simulating how black educational choices would change were they to face the white admission and aid rules shows that race-based advantages had little effect on earnings. However, removing race-based advantages does affect black educational outcomes. In particular, removing advantages in admissions substantially decreases the number of black students at top-tier schools, while removing advantages in financial aid causes a decrease in the number of blacks who attend college.

In traditional models of ability signaling (A. Michael Spence 1973;Andrew Weiss 1995), education provides a way for individuals to sort into groups (education levels) that are correlated with ability. Employers use education to statistically discriminate, paying wages that depend in part on the average ability of the individuals with the same level of education. Building on these models, Henry S. Farber and Robert Gibbons (1996) and Joseph G. Altonji and Charles R. Pierret (2001) develop a framework in which employers do not initially observe the ability of a worker, but learn about it over time. As employers gather more information about the ability of a worker, they rely less on education and more on the new information in determining the wages. In these dynamic learning models, education serves as a tool for workers to signal their unobserved ability, although its role in determining wages decreases with experience.In this paper, we argue that education (specifically attending college) plays a much more direct role in revealing ability to the labor market. Rather than simply sorting individuals into broad ability groups, our results suggest that college allows individuals to directly reveal key aspects of their own ability to the labor market. Following in the tradition of the employer learning literature, the evidence that we provide is based on an examination of the returns to ability over the first 12 years