The ‘discouraged-business-major’ hypothesis: policy implications

Abstract

This paper uses a relatively large dataset of the stated academic major preferences of economics majors at a relatively large, not highly selective, public university in the USA to identify the ‘discouraged-business-majors’ (DBMs). The DBM hypothesis addresses the phenomenon where students who are screened out of the business curriculum often choose an economics major as their alternative. This paper explains how DBMs were identified as a subset of economics majors and then examines how the presence of DBMs affects the quality of students in the economics program. In addition, potential changes affecting the number of economics majors are investigated such as the economics department joining the business school, raising the minimum entry Grade Point Average (GPA), or raising calculus or introductory microeconomics course minimum grade requirements. The dataset was compiled from the transcripts of all economics majors who graduated between Spring 1999 and Spring 2005, that is 436 students over 19 terms. DBMs constituted 42% of economics majors and, on average, underperformed relative to non-DBMs academically. Of the policy changes considered, joining the business school would have the greatest impact, reducing the number of economics majors by 83%, but raising the average GPA of majors from 2.70 to 3.43. Requiring a B– or greater in introductory microeconomics would reduce majors by 32.8% and raise the GPA from 2.70 to 2.82.