The Big Sort: College Reputation and Labor Market Outcomes
W. Bentley Macleod,
Evan Riehl,
Juan E. Saavedra and
Miguel Urquiola
No 21230, NBER Working Papers from National Bureau of Economic Research, Inc
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.
JEL-codes: I21 I23 I24 I25 I26 J01 J24 J3 (search for similar items in EconPapers)
Date: 2015-06
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Published as W. Bentley MacLeod & Evan Riehl & Juan E. Saavedra & Miguel Urquiola, 2017. "The Big Sort: College Reputation and Labor Market Outcomes," American Economic Journal: Applied Economics, American Economic Association, vol. 9(3), pages 223-261, July.
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