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The Big Sort: College Reputation and Labor Market Outcomes

W. Bentley Macleod, Evan Riehl, Juan E. Saavedra and Miguel Urquiola

American Economic Journal: Applied Economics, 2017, vol. 9, issue 3, 223-61

Abstract: We explore how college reputation affects the "big sort," the process by which students choose colleges and find their first jobs. We incorporate a simple definition of college reputation—graduates' mean admission scores—into a competitive labor market model. This generates a clear prediction: if employers use reputation to set wages, then the introduction of a new measure of individual skill will decrease the return to reputation. Administrative data and a natural experiment from the country of Colombia confirm this. Finally, we show that college reputation is positively correlated with graduates' earnings growth, suggesting that reputation matters beyond signaling individual skill.

JEL-codes: I23 I26 J24 J31 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/app.20160126
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Handle: RePEc:aea:aejapp:v:9:y:2017:i:3:p:223-61