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Educational Returns, Ability Composition and Cohort Effects: Theory and Evidence for Cohorts of Early-Career UK Graduates

  • Norman Ireland
  • Robin A. Naylor
  • Jeremy Smith
  • Shqiponja Telhaj

An increase over time in the proportion of young people obtaining a degree is likely to impact on the relative ability compositions (i) of graduates and non-graduates and (ii) across graduates with different classes of degree award. In a signalling framework, we examine the implications of this on biases across cohorts in estimates of educational returns. In an empirical analysis, we exploit administrative data on whole populations of UK university students for ten graduate cohorts to investigate the extent to which early labour market outcomes vary with class of degree awarded. Consistent with our theoretical model, we find that returns by degree class increased across cohorts during a period of substantial graduate expansion. We also corroborate the empirical findings with evidence from complementary data on graduate sample surveys.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0939.

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Date of creation: Jul 2009
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Handle: RePEc:cep:cepdps:dp0939
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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