Big Fishes in Small Ponds: Ability Rank and Human Capital Investment

Benjamin Elsner and Ingo Isphording

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

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 exogenous variation in cohort composition. We nd that a student's ordinal rank in high-school signi cantly affects educational outcomes later in life. If two students with the same ability have a different rank in their respective cohort, the student with the higher rank is signi cantly more likely to nish high-school, to attend college, and to complete a 4-year college degree. These results suggest that students under- invest in their human capital if they have a low rank within their cohort even though they have a high ability compared to most students of the same age. Exploring potential channels, we nd that students with a higher rank have higher expectations about their future career, and feel that they are being treated more fairly by their teachers.

JEL-codes: I21 I23 J24 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-edu, nep-hrm and nep-ure
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc15:112928

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