Friday, September 25, 2009
From the Archive: Estimating the returns to selective colleges
Today, we discussed whether or not attending selective colleges was worth it. We focused primarily on ways in which selective colleges provided different consumption and investment opportunities than non-selective colleges and tried to relate these differences to differences in outcomes that individuals care about (e.g., more income or more happiness). But ultimately, whether or not attending a selective college causally changes individual outcomes is an empirical question.
Caroline Hoxby examined the returns to selective colleges for students entering college in 1960, 1972, and 1982. She finds substantial returns to attending more selective colleges. E.g., moving from a rank 3 to a rank 1 college increases earnings by 129 times the difference in tuition costs (controlling for aptitude). Further, she argues the rate of return has increased over time. A four page summary can be found here.
The Hoxby study, however, includes very few controls for unobserved differences in ability, motivation, etc. which may explain both attendance at selective colleges and higher earnings. Stacy Dale and Alan Krueger attempt to solve at least some of this problem by comparing people were accepted and rejected by similar colleges but chose to attend more or less selective colleges. Using this method, they find that incomes are not increased by attending more selective colleges. However, there are returns to attending more expensive colleges. Finally, regardless of what measure of college quality is used the returns to attending "higher quality" colleges are highest for those from disadvantaged backgrounds. A one page summary of this research can be found here.
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