Valérie Smeets

Field Choice, Skill Specificity, and Labor Market Disruptions

(Joint with Sharon Traiberman and Lin Tian)

Abstract:

We study how college students’ field-of-study choices shape the economy’s  resilience to labor market disruptions. Our framework models forward-looking students whose field choice determines their comparative advantage across occupations and their ability to adjust to shocks.  Using Danish administrative data, we estimate key parameters while accounting for unobserved heterogeneity in both student preferences and worker skills, addressing selection into fields and occupations. We use the model to evaluate how varying degrees of educational flexibility affect the labor market consequences of large economic shocks.  Allowing students to reallocate fields increases individual income gains, with substantially larger gains when capacity constraints are removed. As flexibility rises, income losses become increasingly concentrated among high earners, while more lower-income individuals tend to benefit—raising average returns and improving the distributional resilience of the labor market.