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College Achievement and Earnings

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Author Info

  • Gemus, Jonathan

    ()
    (Department of Economics)

Abstract

I study the size and sources of the monetary return to college achievement as measured by cumulative Grade Point Average (GPA). I first present evidence that the return to achievement is large and statistically significant. I find, however, that this masks variation in the return across different 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 differing and initially uncertain ability levels choose effort 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 effectively 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 reutrn to achievement net of graduate educational attainment is driven by sorting.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2010:1.

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Length: 43 pages
Date of creation: 27 Jan 2010
Date of revision:
Handle: RePEc:hhs:uunewp:2010_001

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
Email:
Web page: http://www.nek.uu.se/
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Related research

Keywords: Returns to Education; Academic Achievement; Signaling; Human Capital;

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References

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. College Achievement and Earnings
    by Ariel Goldring in Free Market Mojo on 2010-02-16 08:18:26

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