The Effect of the Field of Study on the Higher Education Wage Premium - Evidence from Israel

Choosing an academic field of study is an important economic decision; it impacts the skills acquired during the course of one's studies, the occupation and industry when entering the labor market, and consequently, one's potential salary. Using administrative records on the birth cohort of 1975-85 in Israel, we examine the impact of the choice of academic field of study on salary and find that this choice accounts for about 20 per cent of the explained variance in wages. In general, the effects we find are qualitatively similar to those found in a similar study conducted for the United States, although the variance found in Israeli data is slightly higher. Thus, compared with education studies graduates, we find a particularly high premium for computer science and engineering fields, and a negative premium for arts, psychology, architecture, and the humanities.