Estimating the return to college selectivity over the career using earning data

 
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Data show that a college education gives graduates enhanced job opportunities and income over the course of a lifetime — especially for those working in technical fields. But it is difficult to say whether a talented high school senior would necessarily earn more by graduating from an elite college than by graduating from a less selective one.

A 2011 paper from Princeton University, “Estimating the Return to College Selectivity over the Career Using Administrative Earning Data,” analyzed the monetary value of attending a highly selective college over time. The study examined College and Beyond survey data on post-college earnings and Social Security Administration Detailed Earnings Records between 1981 and 2007 for two groups of freshmen enrolled at a range of colleges and universities in 1976 and 1989. A college’s elite status was determined by Barron’s index of college selectivity, the school’s net tuition and the average SAT scores of its students. The researchers also factored in “unobserved” student traits based on the selectivity of the schools a student applied to, with the premise that students “signal their potential ability, motivation and ambition by the choice of schools they apply to.”

Key study findings include:

  • Attendance at a more elite school — one with an average SAT score 100 points or higher than the mean — is associated with 7% higher lifetime earnings. When a variable for “unobserved student characteristics” such as motivation or ambition is factored in, however, the effect drops to almost zero.
  • Monetary returns for male graduates in the 1979 group peaked at nearly 9% in 1998-2009, while those for women peaked at nearly 6% in 2003-2007; students in the 1989 group experienced similar gains. Again, factoring in qualitative characteristics such as motivation or ambition eliminated all statistical significance.
  • The exceptions to this general finding, however, were black and Hispanic students and students who come from less-educated families. For these subgroups, the “estimates of the return to college selectivity remain large, even in models that adjust for unobserved student characteristics.”
  • For African-American and Hispanic students in the 1979 group, attendance at an elite school provided 6.7% higher earnings in 2003-2007. Similar students in the 1989 group saw a 12% rate of return for attending an elite school.
  • A student attending an elite school whose parents had completed high school earned 5.2% more over time; a student whose parents had earned at least undergraduate degrees, saw virtually no monetary returns to attending a more elite college.
  • “The average SAT score of schools that rejected a student is more than twice as strong a predictor of the student’s subsequent earnings as the average SAT score of the school the student attended.” In other words, the quality of the schools a student was interested in attending was more a predictor of future earnings than the quality of the school a student actually attended.

The authors caution that their findings “suggest that the typical student does not unambiguously benefit from attending the most selective college to which he or she was admitted. Rather, our results would suggest that students need to think carefully about the fit between their abilities and interests, the attributes of the school they attend and their career aspirations.”

Tags: race, employment, higher education

    Writer: | Last updated: May 21, 2012

    Citation: Dale, Stacy; Krueger, Alan, B. “Estimating the Return to College Selectivity over the Career Using Administrative Earning Data,” NBER Working Paper No. 17159, June 2011. doi: 10.3386/w17159.
     

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