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A Big Fish in a Small Pond: Ability Rank and Human Capital Investment

Benjamin Elsner () and Ingo Isphording ()

No 9121, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We study the impact of a student's ordinal rank in a high school cohort on educational attainment several years later. To identify a causal effect, we compare multiple cohorts within the same school, exploiting idiosyncratic variation in cohort composition. We find that a student's ordinal rank significantly affects educational outcomes later in life. If two students with the same ability have a different rank in their respective cohort, the higher-ranked student is significantly more likely to finish high school, attend college, and complete a 4-year college degree. These results suggest that low-ranked students under-invest in their human capital even if they have a high ability compared to most students of the same age. Exploring potential channels, we find that students with a higher rank have higher expectations about their future career, a higher perceived intelligence, and receive more support from their teachers.

Keywords: ordinal rank; peer effects; educational attainment; human capital (search for similar items in EconPapers)
JEL-codes: I21 I23 J24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-edu, nep-hrm, nep-lma and nep-ure
Date: 2015-06
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Published in: Journal of Labor Economics, 2017, 35(3), 787-828

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