Early specialization in higher education and labor market outcomes

This study empirically investigates the effects of a policy change in the Republic of Korea that lifted the restriction requiring universities to admit students to groups of departments rather than to single departments. Entry cohorts affected by the policy change had to specify their majors from the beginning of their college education. Using this policy-driven change in the timing of specialization, we find that early specialization lowered wages during early career. This negative wage effect was not driven by selection at admissions or students choosing lower-paying majors and occupations, although graduated majors shifted toward less popular majors. Rather, it is related to their employment in lower-paying industries, which is closely linked to weak local labor demand at the time of graduation. These findings are consistent with less adaptive skills to navigate unexpected changes in the labor market.