The reliability of students’ earnings expectations

• Published in: Labour economics 2022-06, Vol.76, p.102182, Article 102182
• Main Authors: Diaz-Serrano, Luis, Nilsson, William
• Format: Article
• Language: English
• Subjects: Earnings expectations; Measurement error; Reliability; Test-retest
• ISSN: 0927-5371; 1879-1034
• DOI: 10.1016/j.labeco.2022.102182

•Test-retest reliability is calculated for students’ log earnings expectations.•The reliability of students’ earnings expectations is found to be low.•We show how a sensitivity analysis can be performed for external data.•We estimate an important bias if random measurement error is not considered. The elicitation of subjective expectations in surveys has gained significant interest in economics. Students’ earnings expectations have been widely used to model school and occupational choices, but quantification of the reliability of this variable has not yet been done. To what extent are earnings expectations affected by random measurement error? To assess this issue, in this paper we use different waves of a survey carried out in a Spanish university eliciting the earnings expectations of economics students. A test-retest method is applied with different time spans between the first wave and subsequent repetitions of the survey: two weeks and two and a half months later. A significant number of students declared large differences in earnings expectations, even in the case where the time span between surveys was short. Apart from the reliability, we also provide an estimate of the measurement error variance. With this information we show how a sensitivity analysis can be performed in external earnings expectations data research.