Subjective expectations and occupational choices among university students in Mozambique

Policy brief Firms

  • 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.