The Big Sort: College Reputation and Labor Market Outcomes
AbstractWe explore how college reputation affects the "big sort," the process by which students choose colleges and find their first jobs. We incorporate a simple definition of college reputation—graduates' mean admission scores—into a competitive labor market model. This generates a clear prediction: if employers use reputation to set wages, then the introduction of a new measure of individual skill will decrease the return to reputation. Administrative data and a natural experiment from the country of Colombia confirm this. Finally, we show that college reputation is positively correlated with graduates' earnings growth, suggesting that reputation matters beyond signaling individual skill.
CitationMacLeod, W. Bentley, Evan Riehl, Juan E. Saavedra, and Miguel Urquiola. 2017. "The Big Sort: College Reputation and Labor Market Outcomes." American Economic Journal: Applied Economics, 9 (3): 223-61. DOI: 10.1257/app.20160126
- I23 Higher Education; Research Institutions
- I26 Returns to Education
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials