The Returns to College(s): Estimating Value-Added and Match Effects in Higher Education
72 Pages Posted: 14 Feb 2020 Last revised: 21 Aug 2020
Date Written: January 1, 2020
Students who attend different colleges in the U.S. end up with vastly different economic outcomes. We estimate relative value-added of individual colleges to disentangle causal college impacts from student sorting in producing these outcome disparities. Linking administrative registries of high school records, college applications, admissions decisions, enrollment spells, degree completions, and quarterly earnings spanning the Texas population, we identify college value-added by comparing the outcomes of students who apply to and are admitted by the same set of institutions, as this approach strikingly balances student ability measures across college treatments and renders our extensive set of student covariates irrelevant as controls. We estimate a relatively tight, though non-degenerate, distribution of value-added across the wide diversity of Texas public universities. Selectivity is a poor indicator of value-added, with a negative selectivity effect on STEM major completion and only a fleeting selectivity earnings premium that fades out completely after a few years in the labor market. Non-peer college inputs like instructional spending more strongly predict value-added, especially conditional on selectivity, but residual differences in value-added remain that are not neatly summarized by differences in observable quality measures. Examining potential mechanisms, colleges that ultimately boost earnings also tend to boost persistence, BA completion, and STEM degrees along the way. Finally, we probe the potential for (mis)match effects by allowing value-added to vary flexibly by student characteristics, including race, gender, family income, and pre-college measures of cognitive and non-cognitive skills. At first glance, Black students appear to face small negative returns to attending more selective colleges, but this pattern of modest "mismatch" is driven by the availability of two large historically Black universities with above-average value-added. Across the non-HBCUs, Black students face similar returns to selectivity, and indistinguishable value-added schedules more generally, compared to their peers from other backgrounds.
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