The Returns to College(S): Relative Value-Added and Match Effects in Higher Education

73 Pages Posted: 20 Sep 2021 Last revised: 30 Jun 2023

See all articles by Jack Mountjoy

Jack Mountjoy

University of Chicago - Booth School of Business

Brent Hickman

Washington University in St. Louis

Date Written: September 2021

Abstract

Students who attend different colleges in the U.S. end up with vastly different economic outcomes. We study the role of relative value-added across colleges within student choice sets in producing these outcome disparities. Linking high school, college, and earnings registries spanning the state of Texas, we identify relative 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 observable student potential across college treatments and renders our extensive set of covariates irrelevant as controls. Methodologically, we develop a framework for identifying and interpreting value-added under varying assumptions about match effects and sorting gains. Empirically, we estimate a relatively tight, though non-degenerate, distribution of relative value-added across the wide diversity of Texas public universities. Selectivity poorly predicts value-added within student choice sets, with only a fleeting selectivity earnings premium fading to zero after a few years in the labor market. Non-peer college inputs like instructional spending more strongly predict value-added, especially conditional on selectivity. Colleges that boost BA completion, especially in STEM majors, also tend to boost earnings. Finally, we probe the potential for (mis)match effects by allowing value-added schedules to vary by student characteristics.

Suggested Citation

Mountjoy, Jack and Hickman, Brent, The Returns to College(S): Relative Value-Added and Match Effects in Higher Education (September 2021). NBER Working Paper No. w29276, University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-08, Available at SSRN: https://ssrn.com/abstract=3926957

Jack Mountjoy (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Brent Hickman

Washington University in St. Louis

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