The Big Sort: College Reputation and Labor Market Outcomes

73 Pages Posted: 26 Jun 2015

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.

Keywords: education, Colombia, wage formation

JEL Classification: I21, I23, I24, I25, I26, J01, J24, J3

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). CESR-Schaeffer Working Paper No. 2015-013. Available at SSRN: https://ssrn.com/abstract=2622796 or http://dx.doi.org/10.2139/ssrn.2622796

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 )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States

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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