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How Do College Students Respond to Public Information about Earnings?

Previous title: “Belief Updating among College Students: Evidence from Experimental Variation in Information”

2014 September 2011 Number 516
Revised January 2013

JEL classification: D81, D83, D84, I21, I23, J10

Authors: Matthew Wiswall and Basit Zafar

This paper investigates how college students update their future earnings beliefs using a unique “information” experiment: We provide college students true information about the population distribution of earnings, and observe how this information causes them to update their future earnings beliefs. We show that college students are substantially misinformed about population earnings, logically revise their self-earnings beliefs, and have larger revisions when the information is more specific and is “good” news. We classify the updating behaviors observed and find that the majority of students are non-Bayesian updaters. While the average welfare gains from our information provision are positive, we show that counterfactually imposing Bayesian processing of information vastly overestimates the gains from the intervention. Finally, we present evidence that our intervention has long-lasting effects on students’ earnings beliefs.

Available only in PDF pdf

62 pages / 334 kb

For a published version of this report, see Matthew Wiswall and Basit Zafar, "How Do College Students Respond to Public Information about Earnings?" Journal of Human Capital 9, no. 2 (Summer 2015): 117-69.

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