Classic economic models that focus on pecuniary payoffs are relatively silent as to why many highly able individuals have a taste favoring low-paid careers. We integrate the sociological concept of identity into an economic model of career choice and present empirical evidence that identity issues are as important for career choices as ability variables. As a consequence, educational policy and school reforms should not only focus on pecuniary incentives but also on nonpecuniary incentives related to identity formation.
More specifically, we investigate whether nonpecuniary factors in terms of identity payoffs affect the planned choice of level and field of higher education. The idea is that there is a nonpecuniary reward from career choice through its influence on a person's identity (self-image). As in the fields of sociology and psychology, individuals are thought to think of themselves and others in terms of social categories. In addition to the standard pecuniary payoff, the utility function incorporates a nonpecuniary payoff associated with a person's identity, which depends on the agent's choice of social category and on how well the agent's characteristics and actions correspond to the ideal of that social category.
For the empirical analyses, we use the Danish part of the Programme for International Student Assessment (PISA) 2000, which is coupled with detailed register data and a follow-up survey. The follow-up survey includes questions about plans for future education. We use the answers to these questions to derive two measures of educational plans: one for the planned level and one for the planned field of education. The cohort of youths is also asked about their attitudes toward education, working life, and social issues. We use factor analysis to derive two orthogonal factors capturing an individual's identity: one factor which we label "Career orientation" and one factor which we label "Social orientation." We refer to these as the "career" and the "social" factor, respectively. The career factor loads heavily on variables reflecting that career constitutes an important part of life and that chances for promotion are crucial for career choice. The social factor loads heavily on variables reflecting a social and cooperative attitude to education and life in general, that is, questions reflecting the importance of helping other people and the responsibilities of society in solving social problems. The fact that the factors load heavily on questions related to general attitudes about career and society convinces us that the factors are closely related to a person's social identity in the work life.
The career and social factors we identify are a composite of two separate concepts in social sciences: career versus family orientation and individualism versus collectivism. The concepts of career and family identities are used, for example, by Lobel and St. Clair (1992), who used attitudinal questions to derive these two types of identity. The concepts of individualism versus collectivism are used, for example, by Probst, Carnevale, and Triandis (1999) and Singelis et al. (1995), who use attitudinal statements to derive measures of individualism and collectivism.
We estimate logit and multinomial logit models to find the effect of the career and social factors on educational plans controlling for other observables, in particular for family background and ability. In line with Akerlof and Kranton (2002), we interpret a potential effect of the two factors as evidence for nonpecuniary identity-related returns. We find that for women, a higher career factor increases the planned level of education, whereas a higher social factor decreases it. There are no effects for men's behavior. When it comes to planned field of education, we find that a 1 standard deviation increase in the career factor moves 7% of the youths from education and humanities to primarily business, law, and social sciences, whereas a 1 standard deviation increase in the social factor moves 9% of the youths away from business, law, and social sciences and into other fields (mainly health sciences). …