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The Big Sort: College Reputation and Labor Market Outcomes

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  • W. Bentley MacLeod
  • Evan Riehl
  • Juan E. Saavedra
  • Miguel Urquiola

Abstract

We explore how college reputation affects the "big sort," the process by which students choose colleges and find their first jobs. We incorporate a simple definition of college reputation—graduates' mean admission scores—into a competitive labor market model. This generates a clear prediction: if employers use reputation to set wages, then the introduction of a new measure of individual skill will decrease the return to reputation. Administrative data and a natural experiment from the country of Colombia confirm this. Finally, we show that college reputation is positively correlated with graduates' earnings growth, suggesting that reputation matters beyond signaling individual skill.

Suggested Citation

  • W. Bentley MacLeod & Evan Riehl & Juan E. Saavedra & Miguel Urquiola, 2017. "The Big Sort: College Reputation and Labor Market Outcomes," American Economic Journal: Applied Economics, American Economic Association, vol. 9(3), pages 223-261, July.
  • Handle: RePEc:aea:aejapp:v:9:y:2017:i:3:p:223-61
    Note: DOI: 10.1257/app.20160126
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    Cited by:

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    3. Arteaga, Carolina, 2018. "The effect of human capital on earnings: Evidence from a reform at Colombia's top university," Journal of Public Economics, Elsevier, vol. 157(C), pages 212-225.
    4. Piopiunik, Marc & Schwerdt, Guido & Simon, Lisa & Woessmann, Ludger, 2020. "Skills, signals, and employability: An experimental investigation," European Economic Review, Elsevier, vol. 123(C).
    5. Leah Achdut & Elad Gutman & Idan Lipiner & Inbal Maayan & Noam Zussman, 2018. "The Wage Premium on Higher Education: Universities and Colleges," Bank of Israel Working Papers 2018.13, Bank of Israel.
    6. MacLeod, W. Bentley & Urquiola, Miguel, 2020. "Why Does the U.S. Have the Best Research Universities? Incentives, Resources, and Virtuous Circles," IZA Discussion Papers 13203, Institute of Labor Economics (IZA).
    7. W. Bentley MacLeod & Miguel Urquiola, 2018. "Is Education Consumption or Investment? Implications for the Effect of School Competition," NBER Working Papers 25117, National Bureau of Economic Research, Inc.
    8. Evan Riehl & Juan E. Saavedra & Miguel Urquiola, 2018. "Learning and Earning: An Approximation to College Value Added in Two Dimensions," NBER Chapters, in: Productivity in Higher Education, pages 105-132, National Bureau of Economic Research, Inc.
    9. Ricardo Nogales & Pamela Córdova & Manuel Urquidi, 2020. "The impact of university reputation on employment opportunities: Experimental evidence from Bolivia," The Economic and Labour Relations Review, , vol. 31(4), pages 524-542, December.
    10. Nicolás de Roux & Evan Riehl, 2019. "Isolating Peer Effects in the Returns to College Selectivity," Documentos CEDE 017413, Universidad de los Andes - CEDE.
    11. Milla, Joniada, 2017. "The Context-Bound University Selectivity Premium," IZA Discussion Papers 11025, Institute of Labor Economics (IZA).
    12. Anne Boring & Jennifer Brown, 2021. "Gender and Choices in Higher Education," Working Papers hal-03383112, HAL.
    13. Livia Alfonsi & Oriana Bandiera & Vittorio Bassi & Robin Burgess & Imran Rasul & Munshi Sulaiman & Anna Vitali, 2020. "Tackling Youth Unemployment: Evidence From a Labor Market Experiment in Uganda," Econometrica, Econometric Society, vol. 88(6), pages 2369-2414, November.
    14. Anne Boring & Jennifer Brown, 2021. "Gender and Choices in Higher Education," Sciences Po publications 122, Sciences Po.
    15. repec:cep:cverdp:012 is not listed on IDEAS
    16. Frances Woolley, 2018. "The political economy of university education in Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(4), pages 1061-1087, November.
    17. Elliott Ash & Miguel Urquiola, 2020. "A research-based ranking of public policy schools," Scientometrics, Springer;Akadémiai Kiadó, vol. 125(1), pages 499-531, October.
    18. John Manuel Barrios & Laura Giuliano & Andrew J. Leone, 2020. "In Living Color: Does In-Person Screening Affect Who Gets Hired?," Working Papers 2020-38, Becker Friedman Institute for Research In Economics.
    19. Suqin Ge & Elliott Isaac & Amalia Miller, 2018. "Elite Schools and Opting In: Effects of College Selectivity on Career and Family Outcomes," NBER Working Papers 25315, National Bureau of Economic Research, Inc.
    20. Li, Jianwen & Hu, Jinyan, 2019. "Does university reputation matter? Evidence from peer-to-peer lending," Finance Research Letters, Elsevier, vol. 31(C), pages 66-77.
    21. César Edinho Del Pozo Loayza, 2018. "Efectos de la Desregulación del Sistema Universitario en el Mercado Laboral en Perú," CEDLAS, Working Papers 0235, CEDLAS, Universidad Nacional de La Plata.
    22. Meier, Volker & Schiopu, Ioana, 2020. "Enrollment expansion and quality differentiation across higher education systems," Economic Modelling, Elsevier, vol. 90(C), pages 43-53.

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    More about this item

    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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