Why Is an Elite Undergraduate Education Valuable? Evidence from Israel

Abstract

In this paper we compare the labor market performance of Israeli students who graduated from one of the leading universities, Hebrew University (HU), with those who graduated from a professional undergraduate college, College of Management Academic Studies (COMAS). Our results support a model in which employers have good information about the quality of HU graduates and pay them according to their ability, but in which the market has relatively little information about COMAS graduates. Hence, high-skill COMAS graduates are initially treated as if they were the average COMAS graduate, who is weaker than a HU graduate, consequently earning less than UH graduates. However, over time the market differentiates among them so that after several years of experience, COMAS and HU graduates with similar entry scores have similar earnings. Our results are therefore consistent with the view that employers use education information to screen workers but that the market acquires information fairly rapidly.

Does employer learning vary by schooling attainment? The answer depends on how career start dates are defined

“…Our results contradict ABH, who find evidence of employer learning for the S = 12 workers but not for the S = 16 workers. However, our results are consistent with Lang and Siniver (2011) and Bordón and Braga (2013) who, to our knowledge, are the only other analysts to test for employer learning using samples of college-educated workers. These studies report clear-cut evidence of employer learning for college graduates in Israel and Chile, respectively.…”

“…Standard errors are corrected for non-independence of observations reported over time by the same individual. 16 Lang and Siniver (2011) find that employers need seven years to learn fully the productivity of "regular" college graduates, although they find no evidence of employer learning for graduates of elite institutions. The NLSY79 sample is dominated by college-goers at non-elite institutions.…”

Merit Aid, College Quality, and College Completion: Massachusetts' Adams Scholarship as an In-Kind Subsidy

“…Estimates of the impact of college quality on labor market earnings are similarly varied, with some positive (Loury and Garman 1995, Brewer et al 1999, Chevalier and Conlon 2003, Black and Smith 2004, Black and Smith 2006, Long 2008, Hoekstra 2009, Andrews et al 2012, some zero or positive only for disadvantaged subgroups Krueger 2002, Dale andKrueger 2011), and some suggesting that earnings differences dissipate once the job market properly understands graduates' underlying ability (Brand andHalaby 2006, Lang andSiniver 2011). Nearly all of these research designs attempt to eliminate selection bias either by conditioning on students' observable characteristics or by instrumenting college quality with distance from or tuition of nearby colleges.…”

Worker Signals Among New College Graduates: The Role of Selectivity and GPA

“…Lang and Siniver (2011) examine the return to attending the more selective of two universities in Israel that have courses taught by common faculty and that share resources. Using a regression discontinuity design, they find a significant premium to attending the more selective institution and, given the common faculty and other resources, argue that the result is consistent with a quality signal framework.…”