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The Best Business Schools: A Market Based Approach

  • Joseph Tracy
  • Joel Waldfogel

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
Date of revision:
Publication status: published as Journal of Business, 1997, vol.70, No.1, pp.1-31
Handle: RePEc:nbr:nberwo:4609
Note: LS
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. 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.
  2. Alan B. Krueger & Lawrence H. Summers, 1986. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc.
  3. Ronald G. Ehrenberg, 1988. "An Economic Analysis of the Market for Law School Students," NBER Working Papers 2602, 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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