The Big Sort: College Reputation and Labor Market Outcomes

W. Bentley MacLeod, Evan D Riehl, Juan Saavedra, Miguel S. Urquiola
2015 Social Science Research Network  
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,
more » ... nlike 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.
doi:10.2139/ssrn.2622796 fatcat:5gpfnlsdcjabnavczu7gpwj2su