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A question of degree: the effects of degree class on labor market outcomes

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  • Andy Feng
  • Georg Graetz
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    Abstract

    In this paper we estimate the sorting effects of university degree class on initial labor market outcomes using a regression discontinuity design that exploits institutional rules governing the award of degrees. Consistent with anecdotal evidence, we find sizeable and significant effects for Upper Second degrees and positive but smaller effects for First Class degrees on wages. In additional results we explore differences across groups and find evidence consistent with a simple model of statistical discrimination on the basis of gender and types of degree programmes. When we split the sample by ability, we find that the signaling effects are similar in the high ability group but stronger for Upper Second degrees in the lower ability group. The evidence points to the importance of sorting in the high skills labor market.

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    File URL: http://eprints.lse.ac.uk/51562/
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    Bibliographic Info

    Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 51562.

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    Length: 48 pages
    Date of creation: 2013
    Date of revision:
    Handle: RePEc:ehl:lserod:51562

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    1. Norman Ireland & Robin A. Naylor & Jeremy Smith & Shqiponja Telhaj, 2009. "Educational returns, ability composition and cohort effects: theory and evidence for cohorts of early-career UK graduates," LSE Research Online Documents on Economics 28608, London School of Economics and Political Science, LSE Library.
    2. Peter Arcidiacono & Patrick Bayer & Aurel Hizmo, 2010. "Beyond Signaling and Human Capital: Education and the Revelation of Ability," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 76-104, October.
    3. Christopher Carpenter & Carlos Dobkin, 2009. "The Effect of Alcohol Consumption on Mortality: Regression Discontinuity Evidence from the Minimum Drinking Age," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 164-82, January.
    4. Arcidiacono, Peter, 2004. "Ability sorting and the returns to college major," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 343-375.
    5. Riley, John G, 1979. "Testing the Educational Screening Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S227-52, October.
    6. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-09, January.
    7. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February.
    8. Guido Imbens & Thomas Lemieux, 2007. "Regression Discontinuity Designs: A Guide to Practice," NBER Working Papers 13039, National Bureau of Economic Research, Inc.
    9. Joshua D. Angrist & Guido W. Imbens, 1995. "Identification and Estimation of Local Average Treatment Effects," NBER Technical Working Papers 0118, National Bureau of Economic Research, Inc.
    10. Di Pietro, Giorgio, 2010. "The Impact of Degree Class on the First Destinations of Graduates: A Regression Discontinuity Approach," IZA Discussion Papers 4836, Institute for the Study of Labor (IZA).
    11. David S. Lee & Thomas Lemieux, 2009. "Regression Discontinuity Designs In Economics," Working Papers 1118, Princeton University, Department of Economics, Industrial Relations Section..
    12. David S. Lee & David Card, 2006. "Regression Discontinuity Inference with Specification Error," NBER Technical Working Papers 0322, National Bureau of Economic Research, Inc.
    13. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
    14. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
    15. Racine, Jeffrey S., 2008. "Nonparametric Econometrics: A Primer," Foundations and Trends(R) in Econometrics, now publishers, vol. 3(1), pages 1-88, March.
    16. Layard, Richard & Psacharopoulos, George, 1974. "The Screening Hypothesis and the Returns to Education," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 985-98, Sept./Oct.
    17. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, octubre-d.
    18. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 1-35.
    19. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
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