Investment over the Business Cycle: Insights from College Major Choice∗ Erica Blomy Brian C. Cadenaz Benjamin J. Keysx October 2020 Abstract How does personal exposure to economic conditions affect individual human capital investment choices? Focusing on bachelor's degree recipients, we find that cohorts ex- posed to higher unemployment rates during typical schooling years select majors that earn higher wages, have better employment prospects, and lead to work in a related field. Conditional on expected earnings, recessions also encourage women to enter male-dominated fields, and students of both genders pursue more difficult majors. We conclude that economic environments change how students select majors, and we find evidence that students who respond to the business cycle enjoy earnings typical of their new majors. JEL: E32, I23, J22, J24 Keywords: college major, business cycle, human capital investment, STEM majors, gender differences ∗We thank Joe Altonji, Lisa Kahn, Ofer Malamud, Thomas Lemieux, Seth Zimmerman, and numerous seminar and conference participants for helpful comments. Min Kim and Richard Jin provided outstanding research assistance. Portions of this paper began as independent work by Blom (superseding relevant sections of Blom 2012) and by Cadena and Keys. First draft: September 2014. yUrban Institute; E-mail:
[email protected] zDepartment of Economics, University of Colorado-Boulder, and IZA, E-mail:
[email protected] xThe Wharton School, University of Pennsylvania, and NBER, E-mail:
[email protected] 1 College Major Choice Over the Business Cycle 1 1 Introduction The consequences of economic fluctuations are large and long-lasting, especially among new labor market entrants such as recent college graduates (Kahn 2010, Oreopoulos, von Wachter and Heisz 2012).