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

35 Pages Posted: 4 Sep 2015

See all articles by Benjamin Elsner

Benjamin Elsner

IZA Institute of Labor Economics

Ingo E. Isphording

IZA Institute of Labor Economics

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: educational attainment, peer effects, ordinal rank, human capital

JEL Classification: I21, I23, J24

Suggested Citation

Elsner, Benjamin and Isphording, Ingo E., A Big Fish in a Small Pond: Ability Rank and Human Capital Investment. IZA Discussion Paper No. 9121, Available at SSRN: https://ssrn.com/abstract=2655070 or http://dx.doi.org/10.2139/ssrn.2655070

Benjamin Elsner (Contact Author)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.benjaminelsner.com

Ingo E. Isphording

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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