The Big Sort: College Reputation and Labor Market Outcomes
Year: 2015
Type: article
Study design: Observational Study
Abstract: Spence (1973) noted that individuals’ choice of educational quantity — measured by years of schooling — may stem partially from a desire to signal their ability to the labor market. This paper asks if individuals’ choice of educational quality — measured by college reputation — may likewise signal their ability. We use data on the admission scores of all Colombian college graduates to define a measure of reputation that gives clear predictions in a signaling framework. We find that college reputation, unlike years of schooling, is correlated with graduates’ earnings growth. We also show that Colombia’s staggered rollout of a new signal of skill — a college exit exam — reduced the earnings return to reputation and increased the return to individual admission scores. These results are consistent with the hypothesis that a college’s reputation provides information about the ability of its student body and about its value added, broadly understood.
DOI: 10.1257/app.20160126
Institutions: Columbia University, University of Southern California
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3122207636