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Why is an elite undergraduate education valuable? Evidence from Israel

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  • Lang, Kevin
  • Siniver, Erez

Abstract

In this paper we compare the labor market performance of Israeli students who graduated from one of the leading universities, Hebrew University (HU), with those who graduated from a professional undergraduate college, College of Management Academic Studies (COMAS). Our results support a model in which employers have good information about the quality of HU graduates and pay them according to their ability, but in which the market has relatively little information about COMAS graduates. Hence, high-skill COMAS graduates are initially treated as if they were the average COMAS graduate, who is weaker than a HU graduate, and consequently earn less than HU graduates. However, over time the market differentiates among them so that after several years of experience, COMAS and HU graduates with similar entry scores have similar earnings. Our results are therefore consistent with the view that employers use education information to screen workers but that the market acquires information fairly rapidly.

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  • Lang, Kevin & Siniver, Erez, 2011. "Why is an elite undergraduate education valuable? Evidence from Israel," Labour Economics, Elsevier, vol. 18(6), pages 767-777.
    • Handle: RePEc:eee:labeco:v:18:y:2011:i:6:p:767-777
    DOI: 10.1016/j.labeco.2011.06.008
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    2. Light, Audrey & McGee, Andrew, 2015. "Does employer learning vary by schooling attainment? The answer depends on how career start dates are defined," Labour Economics, Elsevier, vol. 32(C), pages 57-66.
    3. Douglas Coate, 2017. "Varsity Sports Participation, College Selectivity, and First Job in Investment Banking or Management Consulting in the US," Working Papers Rutgers University, Newark 2017-001, Department of Economics, Rutgers University, Newark.
    4. Brad J. Hershbein, 2013. "Worker Signals among New College Graduates: The Role of Selectivity and GPA," Upjohn Working Papers 13-190, W.E. Upjohn Institute for Employment Research.
    5. Suqin Ge & Elliott Isaac & Amalia Miller, 2022. "Elite Schools and Opting In: Effects of College Selectivity on Career and Family Outcomes," Journal of Labor Economics, University of Chicago Press, vol. 40(S1), pages 383-427.
    6. Chris Bidner, 2014. "A spillover‐based theory of credentialism," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(4), pages 1387-1425, November.
    7. Hersch, Joni, 2019. "Catching Up Is Hard to Do: Undergraduate Prestige, Elite Graduate Programs, and the Earnings Premium," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 10(3), pages 503-553, October.
    8. Sarah R. Cohodes & Joshua S. Goodman, 2014. "Merit Aid, College Quality, and College Completion: Massachusetts' Adams Scholarship as an In-Kind Subsidy," American Economic Journal: Applied Economics, American Economic Association, vol. 6(4), pages 251-285, October.
    9. Cohodes, Sarah & Goodman, Joshua, 2012. "First Degree Earns: The Impact of College Quality on College Completion Rates," Working Paper Series rwp12-033, Harvard University, John F. Kennedy School of Government.
    10. Frances Woolley, 2018. "The political economy of university education in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 51(4), pages 1061-1087, November.
    11. Suhonen, Tuomo, 2013. "Are there returns from university location in a state-funded university system?," Regional Science and Urban Economics, Elsevier, vol. 43(3), pages 465-478.
    12. Bordón, Paola & Braga, Breno, 2020. "Employer learning, statistical discrimination and university prestige," Economics of Education Review, Elsevier, vol. 77(C).
    13. Milla, Joniada, 2017. "The Context-Bound University Selectivity Premium," IZA Discussion Papers 11025, Institute of Labor Economics (IZA).
    14. Tuomo Suhonen, 2014. "Quality of higher education and earnings: evidence from Finland using field-of-study-level quality measures," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(1), pages 22-44, January.
    15. Broecke, Stijn, 2012. "University selectivity and earnings: Evidence from UK data on applications and admissions to university," Economics of Education Review, Elsevier, vol. 31(3), pages 96-107.
    16. Douglas Coate, 2018. "Varsity Sports Participation, College Selectivity, and First Job in Investment Banking or Management Consulting in the US," Working Papers Rutgers University, Newark 2018-002, Department of Economics, Rutgers University, Newark.

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    Keywords

    Education; Labor market;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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