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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

Spence (1973) noted that individuals’ choice of educational quantity—measured by years of schooling—may stem partially from a desire to signal their ability to the labor market. This paper asks if individuals’ choice of educational quality—measured by college reputation—may likewise signal their ability. We use data on the admission scores of all Colombian college graduates to define a measure of reputation that gives clear predictions in a signaling framework. We find that college reputation, unlike years of schooling, is correlated with graduates’ earnings growth. We also show that Colombia’s staggered rollout of a new signal of skill—a college exit exam—reduced the earnings return to reputation and increased the return to individual admission scores. These results are consistent with the hypothesis that a college’s reputation provides information about the ability of its student body and about its value added, broadly understood.

Suggested Citation

  • W. Bentley MacLeod & Evan Riehl & Juan E. Saavedra & Miguel Urquiola, 2015. "The Big Sort: College Reputation and Labor Market Outcomes," NBER Working Papers 21230, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:21230
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    Cited by:

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    2. 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.
    3. Piopiunik, Marc & Schwerdt, Guido & Simon, Lisa & Woessmann, Ludger, 2020. "Skills, signals, and employability: An experimental investigation," European Economic Review, Elsevier, vol. 123(C).
    4. 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.
    5. Machin, Stephen & McNally, Sandra & Ruiz-Valenzuela, Jenifer, 2020. "Entry through the narrow door: The costs of just failing high stakes exams," Journal of Public Economics, Elsevier, vol. 190(C).
    6. 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.
    7. 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).
    8. 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.
    9. 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.
    10. 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.
    11. Meier, Volker & Schiopu, Ioana, 2020. "Enrollment expansion and quality differentiation across higher education systems," Economic Modelling, Elsevier, vol. 90(C), pages 43-53.
    12. Elliott Ash & Miguel Urquiola, 2020. "A research-based ranking of public policy schools," Scientometrics, Springer;Akadémiai Kiadó, vol. 125(1), pages 499-531, October.
    13. Bordón, Paola & Braga, Breno, 2020. "Employer learning, statistical discrimination and university prestige," Economics of Education Review, Elsevier, vol. 77(C).
    14. 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.
    15. Milla, Joniada, 2017. "The Context-Bound University Selectivity Premium," IZA Discussion Papers 11025, Institute of Labor Economics (IZA).
    16. 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.
    17. 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.
    18. Nicolás de Roux & Evan Riehl, 2019. "Isolating Peer Effects in the Returns to College Selectivity," Documentos CEDE 017413, Universidad de los Andes - CEDE.
    19. Anne Boring & Jennifer Brown, 2021. "Gender and Choices in Higher Education," Working Papers hal-03383112, HAL.
    20. Anne Boring & Jennifer Brown, 2021. "Gender and Choices in Higher Education," Sciences Po publications 122, Sciences Po.
    21. repec:cep:cverdp:012 is not listed on IDEAS
    22. 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.

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    More about this item

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • 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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