College Achievement and Earnings
AbstractI study the size and sources of the monetary return to college achievement as measured by cumulative Grade Point Average (GPA). I rst present evidence that the return to achievement is large and statistically signi cant. I nd, however, that this masks variation in the return across di erent groups of people. In particular, there is no relationship between GPA and earnings for graduate degree holders but a large and positive relationship for people without a graduate degree. To reconcile these results, I develop a model where students of di ering and initially uncertain ability levels choose e ort level in college and whether to earn a graduate degree. College achievement and graduate attainment are allowed to increase human capital and be used by employers to screen workers. In the separating equilibrium studied, workers who earn a graduate degree can e ectively signal high productivity to employers. As a result, employers use undergraduate GPA-a noisy signal of productivity-to screen only the workers who do not hold a graduate degree. Viewing the empirical results through the lens of this equilibrium, the zero GPA-earnings relationship for graduate degree holders and the positive and large relationship for people without a graduate degree suggests that most of the return to achievement net of graduate educational attainment is driven by sorting.
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Bibliographic InfoPaper provided by Uppsala University, Department of Economics in its series Working Paper Series, Center for Labor Studies with number 2010:9.
Length: 45 pages
Date of creation: 04 Jan 2010
Date of revision:
Contact details of provider:
Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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keywords are Schooling Costs; Educational Attainment; Financial Aid Policies;
Find related papers by JEL classification:
- I20 - Health, Education, and Welfare - - Education - - - General
- I28 - Health, Education, and Welfare - - Education - - - Government Policy
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-11 (All new papers)
- NEP-EDU-2010-12-11 (Education)
- NEP-LAB-2010-12-11 (Labour Economics)
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