This paper focuses on how college students form expectations about various major- specific outcomes. Zafar collects a unique panel data set of Northwestern University undergraduates that contains their subjective expectations about major-specific outcomes. Although students tend to be overconfident about their future academic performance, the author finds that they revise their expectations about various major-specific outcomes in systematic ways. Furthermore, students seem to update their probabilistic beliefs in a manner consistent with Bayesian analysis: Prior beliefs about outcomes to be realized in college tend to be fairly precise, while new information influences prior beliefs about outcomes in the workplace. Moreover, students who are more uncertain about major-specific outcomes in the initial survey make greater absolute revisions in their beliefs in the follow-up survey. Finally, Zafar presents evidence that learning plays a role in the decision to switch majors.

This paper analyzes the effect of school vouchers on student sorting and whether vouchers can be designed to reduce or eliminate it. Chakrabarti focuses on two crucial requirements of the Milwaukee voucher program: 1) private schools must select students randomly and 2) private schools must accept the voucher amount as full tuition payment (that is, “topping up” of vouchers is not permitted). Using a theoretical model, she argues that random selection alone cannot prevent student sorting. However, random selection without topping up can preclude sorting by income, although there is still sorting by ability. Sorting by ability is not caused here by private-school selection, but by parental self-selection. Examining the first five years of the Milwaukee program, the author establishes that random selection has taken place, providing an appropriate setting for testing the corresponding theoretical predictions in the data. She demonstrates that these predications are validated empirically.

Using data from the nationally representative Surveys of Small Business Finances, Cole and Mehran document empirical regularities in male- and female-owned firms. They find that female-owned firms are 1) significantly smaller, as measured by sales, assets, and employment; 2) younger, as measured by age of the firm; 3) more likely to be organized as proprietorships and less as corporations; 4) more likely to be in retail trade and business services; and 5) inclined to have fewer and shorter banking relationships. Moreover, female owners are significantly younger, less experienced, and not as well educated. The authors also find strong univariate evidence that female-owned firms are significantly more likely to be credit-constrained because they are more likely to be discouraged from applying for credit, though not more likely to be denied credit when they do apply. However, any differences are rendered insignificant in a multivariate setting, which controls for other firm and owner characteristics.

This paper examines the micro-foundations of occupational agglomeration in U.S. metropolitan areas, with an emphasis on labor market pooling. Controlling for a wide range of occupational attributes, including proxies for the use of specialized machinery and for the importance of knowledge spillovers, Gabe and Abel find that jobs characterized by a unique knowledge base exhibit higher levels of geographic concentration than do occupations with generic knowledge requirements. Further, by analyzing co-agglomeration patterns, the authors find that occupations with similar knowledge requirements tend to co-agglomerate. Both results provide new evidence on the importance of labor market pooling as a determinant of occupational agglomeration.

This paper presents a dynamic model for light motor vehicles. Consumers solve an optimal stopping problem in deciding if they want a new automobile and when in the model year to purchase it. This dynamic approach allows for determining how the mix of consumers evolves over the model year and for measuring consumers’ substitution patterns across products and time. Copeland finds that temporal substitution is significant, driving consumers’ entry into and exit from the market. Through counterfactuals, he shows that because consumers will temporarily substitute to a large degree, failure to account for automakers’ dynamic pricing strategies results in an inaccurate picture of the return to using pricing incentives. A further finding is that the large price discounts typically offered at the end of the model year result in price discrimination by inducing price-sensitive consumers to delay purchasing new vehicles until the later months of the model year.