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A Big Fish in a Small Pond: Ability Rank and Human Capital Investment

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  • Elsner, Benjamin

    (University College Dublin)

  • Isphording, Ingo E.

    (IZA)

Abstract

We study the impact of a student's ordinal rank in a high school cohort on educational attainment several years later. To identify a causal effect, we compare multiple cohorts within the same school, exploiting idiosyncratic variation in cohort composition. We find that a student's ordinal rank significantly affects educational outcomes later in life. If two students with the same ability have a different rank in their respective cohort, the higher-ranked student is significantly more likely to finish high school, attend college, and complete a 4-year college degree. These results suggest that low-ranked students under-invest in their human capital even if they have a high ability compared to most students of the same age. Exploring potential channels, we find that students with a higher rank have higher expectations about their future career, a higher perceived intelligence, and receive more support from their teachers.

Suggested Citation

  • Elsner, Benjamin & Isphording, Ingo E., 2015. "A Big Fish in a Small Pond: Ability Rank and Human Capital Investment," IZA Discussion Papers 9121, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp9121
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    More about this item

    Keywords

    ordinal rank; peer effects; educational attainment; human capital;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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