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The Best Business Schools: A Market Based Approach

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  • Joseph Tracy
  • Joel Waldfogel

Abstract

We present a new methodology for ranking business schools. Unlike previous rankings based on subjective survey responses (from CEOs, business school deans, recruiters, or graduates), our approach uses data derived from the labor market for new MBAs. We adjust programs' salaries for the quality of entering students in an attempt to distinguish value added from the quality of incoming students. We then rank programs according to value added. Our results are rather surprising. While four of our top five programs are also labelled as top programs in other rankings, ten of our top twenty are previously unranked. By emphasizing program value added, our procedure identifies several programs that have been overlooked by other rankings since they do not recruit the very top students. We explore the determinants of our value added and student quality measures and find that connections to the business community are positively related to value added, while academic research and high faculty salaries are more strongly associated with student quality. We also find that tuition is better explained by our measure of value added than raw salary, suggesting that programs charge according to value added.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4609.

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Date of creation: Jan 1994
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Publication status: published as Journal of Business, 1997, vol.70, No.1, pp.1-31
Handle: RePEc:nbr:nberwo:4609
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Find related papers by JEL classification:
  • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
  • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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  1. Ronald G. Ehrenberg, 1988. "An Economic Analysis of the Market for Law School Students," NBER Working Papers 2602, National Bureau of Economic Research, Inc.
  2. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
  3. Alan B. Krueger & Lawrence H. Summers, 1986. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc.
  4. Gyourko, Joseph & Tracy, Joseph, 1991. "The Structure of Local Public Finance and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 774-806, August.
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Cited by:

  1. Winkler, Anne E. & Levin, Sharon & Stephan, Paula & Glänzel, Wolfgang, 2011. "Publishing Trends in Economics across Colleges and Universities, 1991-2007," IZA Discussion Papers 6082, Institute for the Study of Labor (IZA).
  2. Gicheva, Dora, 2012. "Worker mobility, employer-provided general training, and the choice of graduate education," Labour Economics, Elsevier, vol. 19(2), pages 232-240.
  3. Benito Arruñada & Xosé H. Vázquez, 2010. "Behavioral Assumptions and Management Ability," Working Papers 452, Barcelona Graduate School of Economics.
  4. Ray, Subhash C. & Jeon, Yongil, 2008. "Reputation and efficiency: A non-parametric assessment of America's top-rated MBA programs," European Journal of Operational Research, Elsevier, vol. 189(1), pages 245-268, August.
  5. Besancenot, Damien & Faria, João Ricardo, 2010. "Good research and bad teaching? A business school tale," Research in Economics, Elsevier, vol. 64(2), pages 67-72, June.
  6. Paul Oyer, 2006. "The Making of an Investment Banker: Macroeconomic Shocks, Career Choice, and Lifetime Income," NBER Working Papers 12059, National Bureau of Economic Research, Inc.
  7. Ravallion, Martin, 2000. "What can we learn about country performance from conditional comparisons across countries?," Policy Research Working Paper Series 2342, The World Bank.
  8. Yongil Jeon & Stephen M. Miller & Subhash C. Ray, 2003. "MBA Program Reputation: Objective Rankings for Students, Employers and Program Administrators," Working papers 2003-28, University of Connecticut, Department of Economics.
  9. Qi Kong & Michael R. Veall, 2005. "Does the Maclean's Ranking Matter?," Canadian Public Policy, University of Toronto Press, vol. 31(3), pages 231-242, September.
  10. Grove, Wayne A. & Hussey, Andrew, 2014. "Returns to MBA quality: Pecuniary and non-pecuniary returns to peers, faculty, and institution quality," Labour Economics, Elsevier, vol. 26(C), pages 43-54.
  11. Yongil Jeon & Stephen M. Miller & Subhash C. Ray, 2007. "MBA Program Reputation And Quantitative Rankings: New Information for Students, Employers, And Program Administrators," Working papers 2007-44, University of Connecticut, Department of Economics.
  12. Ram Mudambi & Mike Peng & David Weng, 2008. "Research rankings of Asia Pacific business schools: Global versus local knowledge strategies," Asia Pacific Journal of Management, Springer, vol. 25(2), pages 171-188, June.
  13. Steven M. Shugan, 2003. "Editorial: Journal Rankings: Save the Outlets for Your Research," Marketing Science, INFORMS, vol. 22(4), pages 437-441.
  14. Dahlia K. Remler & Elda Pema, 2009. "Why do Institutions of Higher Education Reward Research While Selling Education?," NBER Working Papers 14974, National Bureau of Economic Research, Inc.
  15. Caroline Elliott & Kwok Tong Soo, 2012. "The Returns to an MBA Degree: The Impact of Programme Attributes," Working Papers 24284646, Lancaster University Management School, Economics Department.

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