Subjective expectations and occupational choices among university students in Mozambique

Policy brief 7 Jan 2019 Firms

Authors

The transition from school to the labour market is receiving growing attention among economists and policymakers, especially in developing countries.
This study examines the role of subjective expectations about employment and earnings in influencing occupational choices in three different sectors (public, private, and self- employment) among university students in Mozambique.
We use a combination of tailored survey data collected under different scenarios and a randomised information treatment administrated to over 800 students from different college majors in two leading universities in Maputo.
Results suggest that students update beliefs after the information treatment in the way we expect and sort into occupation according to average expected earnings. Expected riskiness of occupations also plays a role: students tend to avoid occupations with disparities in high earnings and low probability of finding a job. Furthermore, disregarding uncertainty might lead to an overestimation of the importance of expected average earnings.
The findings of the study suggest that students tend to under-estimate returns to higher education in the self-employment sector, while over-estimating them in the public sector, highlighting one potential and fundamental cause of the skills mismatch in the Mozambican labour market.