Tuesday, November 15, 2011

Elite Institutions and Career Earnings

I finished reading Charles Wheelan's interesting book called "Naked Economics: Undressing the dismal science". It is a highly entertaining book for anyone with even a passing interest in how the world around us works. In tone, it resembles Freakanomics, but in terms of span, it feels much wider and more comprehensive, perhaps because it is not merely a collection of vignettes.

In one of the chapters, he points out to an interesting study by Krueger and Dale (2002). Graduates of highly selective schools earn higher salaries later in life than graduates of less selective schools. This does not seem very surprising.

Next, they examined the outcomes of students who were admitted to both a highly selective school, and a moderately selective school. The outcome (also the title of their 2002 paper) was that "Children Smart Enough to Get into Elite Schools may not need to Bother."

There is a more recent follow-up to that study, essentially reiterates the same conclusion.

The average SAT score of the most selective school a student applies to, is the best predictor of his or her future (monetary) success.

There is an important caveat. Minorities and other disadvantaged students gain the most from choosing an elite school over a less selective one.

Here's an interesting summary of what that means in practical terms:
Mr. Krueger gets the last word: 
My advice to students: Don’t believe that the only school worth attending is one that would not admit you. That you go to college is more important than where you go. Find a school whose academic strengths match your interests and that devotes resources to instruction in those fields. Recognize that your own motivation, ambition and talents will determine your success more than the college name on your diploma.
My advice to elite colleges: Recognize that the most disadvantaged students benefit most from your instruction. Set financial aid and admission policies accordingly.

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