college selectivity


There are many estimates of the effect of college quality on students’ subsequent earnings. One
difficulty interpreting past estimates, however, is that elite colleges admit students, in part, based on
characteristics that are related to their earnings capacity. Since some of these characteristics are
unobserved by researchers who later estimate wage equations, it is difficult to parse out the effect of
attending a selective college from the students‘ pre-college characteristics. This paper uses
information on the set of colleges at which students were accepted and rejected to remove the effect
of unobserved characteristics that influence college admission. Specifically, we match students in
the newly collected College and Beyond (C&B) Data Set who were admitted to and rejected from a
similar set of institutions, and estimate fixed effects models. As another approach to adjust for
selection bias, we control for the average SAT score of the schools to which students applied using
both the C&B and National Longitudinal Survey of the High School Class of 1972. We find that
students who attended more selective colleges do not earn more than other students who were
accepted and rejected by comparable schools but attended less selective colleges. However, the
average tuition charged by the school is significantly related to the students’ subsequent earnings.
Indeed, we find a substantial internal rate of return from attending a more costly college. Lastly,
the payoff to attending an elite college appears to be greater for students from more disadvantaged
family backgrounds.

Year of Publication
Date Published
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Citation Key
Dale, S. B., & Krueger, A. (1998). Estimating the Payoff to Attending a More Selective College: An Application of Selection on Observables and Unobservables. Retrieved from (Original work published December 1998)
Working Papers