Studying-Working Trade-off in Contests With Capacity Constrained Students

The choice of education and career trajectory plays a crucial role in both students' behaviour and the labor market outcomes. This paper investigates how students allocate limited time across academic activities and gaining some working experience. We show that in a setting where students' types (or abilities) constitute private information, there exists both pooling and separating equilibria, which are sustained under a certain state of the job market. Our theoretical model shows how the choice between working and studying of each student depends on the contract schemes, their abilities and expectations about the benefits of a master's diploma. To test the main predictions of the model, we conduct a survey of 122 HSE Economics students, who are going to complete their bachelor's degree in 2022. Our empirical findings partially confirm what the theory predicts. We also provide possible explanations for those effects that are not in line with our model but observed among the students.