The Big Sort: College Reputation and Labor Market Outcomes

73 Pages Posted: 8 Jun 2015 Last revised: 6 Jul 2018

See all articles by W. Bentley MacLeod

W. Bentley MacLeod

Columbia University - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Evan Riehl

Cornell University, Department of Economics

Juan Saavedra

University of Southern California - Department of Economics; Center for Economic and Social Research (CESR)

Miguel S. Urquiola

Columbia University

Multiple version iconThere are 2 versions of this paper

Date Written: June 2015

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.

Suggested Citation

MacLeod, William Bentley and Riehl, Evan and Saavedra, Juan and Urquiola, Miguel S., The Big Sort: College Reputation and Labor Market Outcomes (June 2015). NBER Working Paper No. w21230. Available at SSRN: https://ssrn.com/abstract=2615636

William Bentley MacLeod (Contact Author)

Columbia University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics ( email )

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Evan Riehl

Cornell University, Department of Economics ( email )

Juan Saavedra

University of Southern California - Department of Economics ( email )

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Los Angeles, CA 90089
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Center for Economic and Social Research (CESR)

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Los Angeles, CA 90089-3332
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Miguel S. Urquiola

Columbia University ( email )

420 W. 118th Street
New York, NY 10027
United States

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