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Posted at 5:43 PM ET, 02/11/2011

What's an elite education worth?

By Ezra Klein

At the beginning? Quite a bit. Over time? Not as much.

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 an] HU graduate, consequently earning less than [HU] 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.

By Ezra Klein  | February 11, 2011; 5:43 PM ET
Categories:  Education  
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Posted by: keyli96 | February 11, 2011 9:42 PM | Report abuse


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Posted by: keyli96 | February 11, 2011 9:42 PM | Report abuse

It's the same phenomenon as GPA. It's a signaling effect for employers. They don't actually care what your GPA is, but the fact that you worked hard enough to get a good one signals that you might work hard for them too. Over time what you did in college doesn't really matter and employers have more information about how you act in the work place. The real value for the educated person is if an elite education allows you to skip a few rungs and go on the same trajectory upwards from a higher starting place.

Posted by: tgates573 | February 12, 2011 5:29 PM | Report abuse

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