College Quality and Labor Market Outcomes Ratterree and Rosage 2014

Running head: COLLEGE QUALITY AND LABOR MARKET OUTCOMES
College Quality and Labor Market Outcomes: A Review of the Literature

Katie Ratterree and Mary Rosage
North Carolina State University

COLLEGE QUALITY AND LABOR MARKET OUTCOMES 2
Introduction
The changing nature of higher education and the U.S. workforce is essential to
understanding how returns to education vary across time (Long, 2010). Returns to education do
not operate in a vacuum but rather as a factor of the labor market economy. As demands have
shifted over time away from manual labor and towards a more high-skilled workforce, there has
been an increasing number of students seeking further education. Early studies on educational
quality simply focused on the number of years spent in school but now researchers are becoming
more interested in the returns to individual and institutional characteristics (Monks, 2000). The
choice of which college to attend is a cost-benefit analysis that includes both the cost of school
and the cost of what one must give up to go, or opportunity cost, most commonly measured as
foregone earnings (Thomas, 2000). In order to make informed decisions regarding the pursuit of
higher education, students need information on college quality, expected outcomes, and
differentials based on both individual and institutional characteristics. This paper seeks to
summarize the current literature surrounding these topics and to provide a direction for future
research regarding the impact of college quality on labor market outcomes.
Background
Whether it's done consciously or not, students most likely choose to attend college
because they expect a greater return for going than not (Thomas, 2000). Because it is expensive
to go to college, it is typically assumed that students choose to attend the school that they think
will give them the most return on their investment (Long, 2008). As the cost of education rises,
the value of a degree may change if returns do not increase at the same rate. For instance,
according to Dale and Kruegers (2002) calculations, there was a large return to expensive
tuition in the 1970s that likely contributed to the increased cost of higher education in the
decades following. However, considering that tuition has doubled in comparison to cost in the
1970s, the rate of return would drop by 8%. This is essential for students to understand if they
want to evaluate if it's "worth it" to go to college because the cost of attendance is so high.
According to human capital theory, the more time that an individual invests in their
education, the more productive of a worker they will be in the labor market (Weiss, 1995). This
interpretation of the value of education assumes that students are gaining skills that they would
not otherwise have without the additional years of schooling. A signaling model on the other
hand is grounded in the assumption that students who remain in school possess certain qualities
that employers want in their employees but that may not necessarily be a result of their
education. In other words, qualities like persistence and good health are characteristic of students
who continue to pursue education, allowing employers to sort out less qualified workers who do
not possess the same credentials regardless of actual, observed ability.
How employers perceive students education credentials is critical to evaluating financial
returns based on college quality. Based on human capital theory, an individuals choice of school
will impact wages as a result of their experience at that school, time enrolled, individual
qualities, and institutional characteristics (Monks, 2000). For instance, because of peer effects
when surrounded by other bright students, those enrolled in higher quality schools may have
greater benefits. Or, if the instruction is better, the students might learn more. Classroom
atmosphere and curriculum may create more analytical thinkers and better problem solvers. As a
result, students at different schools with different levels of quality will experience different
human capital outputs. If employers rely on a human capital model when hiring, then students
from higher quality schools may be better prepared and therefore more likely to be employed. If
the human capital theory is correct, college quality should have a substantial effect on earnings
(Zhang, 2005). However, according to the Spence signaling model (1974), employers rely on
market signals to hire workers (as cited in Arkes, 1999). In this case, school name, level of
education, major, and other factors may influence earnings regardless of individual attributes or
ability (Monks, 2000). More productive workers can distinguish themselves and create more
opportunities through a signal such as a bachelors degree that differentiates them from other less
productive workers (Arkes, 1999). This is especially likely when institutional characteristics are
easier to observe than individual ones (Monks, 2000).
It should also be noted that hiring decisions may be a combination of both human capital
and signaling theories. Arkes (1999) attempted to separate the two by conducting a study to
evaluate pre-college abilities and how certain degrees function as a signal to employers. He
found that a high school diploma, college attendance, a bachelors degree, and a graduate degree
all function as a signal to employers of students' pre-college ability. If this were a pure signaling
model, a pre-college test that captures the ability conveyed through these degrees would serve as
an equivalent substitute for the credential. However, once ability is controlled for, there still
appear to be labor market benefits of both an associates and a bachelors degree implying that
they may signal other harder to measure qualities to employers such as motivation and
perseverance. Therefore, at least for bachelors and associate degrees, a cognitive ability test
would not account for all of the factors employers evaluate using a signaling model for these
degrees.
College Quality
College quality is hard to measure and there is no single, agreed-upon criterion for what
makes one school better than another. Common measures of quality include SAT scores,
Barrons ratings, and net tuition. The students selected to study and the schools included in
quality samples are derived from national databases that hold a wealth of information on
characteristics of both students and institutions. Research on returns to education by college
quality vary depending on the method, data sets, and measures of institutional selectivity used to
calculate outcomes.
Measuring College Quality
Institutional selectivity, typically based on Barrons Profiles of American Colleges, is the
most used indicator of college quality in the relevant literature. Barrons ratings index schools
into six selectivity groups based on average SAT scores, high school class rank of incoming
freshmen, high school GPA, and admittance rate (Thomas & Zhang, 2005a). These rankings are
commonly accepted measures of college selectivity but Thomas and Zhang (2005b) argued that
selectivity is only a component of quality, not a standalone indication of it. This may explain
why only some studies include Barrons rankings as the sole measure for quality (Brewer et al,
1999; Monks, 2000, Thomas & Zhang, 2005a) while others include additional measures and
construct their own quality index. For instance, Longs (2008) study on the effect of quality on
earnings uses Barrons index as a supplement to the Integrated Postsecondary Education Data
System (IPEDS). IPEDS data provides information on net tuition (cost of attendance less
financial aid received), average salary of full professors, and the undergraduate student to faculty
ratio. The aggregate of these metrics is sorted to form a quality index beyond simply Barrons
selectivity as a base for the study.
Other studies use a variation of Longs (2008) approach. His succeeding analysis on
early adulthood outcomes of education used the same metrics but included rejection rates (Long,
2010). While not widely used in other studies, rejection rates help to create the college quality
index by grouping students who were accepted and rejected from similar schools (Dale &
Krueger, 2002). Thomas (2000, 2003) and Rumberger and Thomas (1993) depart from the
traditional use of Barrons by using Astins selectivity ratings. These ratings are determined by
SAT scores, undergraduate student to faculty ratio, percentage of full-time undergraduates, and
size of student body (Thomas, 2000, 2003). Irrespective of the combination of data used to
group colleges into quality, all studies use SAT scores in some manner to benchmark quality
(Smith, 2013; Dale & Krueger, 2011, 2002; Long, 2008, 2010; Thomas & Zhang, 2005a; Black
& Smith, 2004; Thomas, 2003, 2000; Monks, 2000; Brewer, Eide, Ehrenberg, 1999; Rumberger
& Thomas, 1993). However, Rothstein (2004) indicates that once background characteristics are
controlled for, SAT is not as strong of an indicator of how a student will perform in college. As
the focus on tuition hikes grows, more recent studies also include net tuition under quality,
mainly to determine the effect of sticker price on labor market outcomes (Smith, 2013; Dale &
Krueger, 2002, 2011; Long, 2010, 2008).
The use of different metrics to calculate quality may be concerning to the consistency
of results. Zhang (2005) explores the implications of various quality measures on the results of
wage studies. Using the same student and school-level data across the entire sample, his study
determines the difference in findings between Barrons ratings, SAT scores, Carnegie
classifications and net tuition as benchmarks for quality. Zhang found that each measure
includes a different set of colleges in a quality group because each has a different set of criteria
for quality. For example, Carnegie-classified colleges are a larger sample than Barrons colleges
because the information is easier to find for most institutions. Each measure also yields a
different level of strength between quality and earnings; however, they all reach the conclusion
that quality has an impact on earnings. For example, Zhangs calculations show that Barrons
yields a larger effect of quality on earnings than average SAT scores. This study asserts that
while the general conclusion of this research question is the same across studies, the instrument
used to measure it may lead to differences in the findings.
Student-Level Source Data
Literature on the returns to education quality is grounded in longitudinal cohort
data. These types of studies survey a cohort of students at a certain point in time, usually in high
school or college, and resurvey them through the remainder of their education and beyond. The
data from these studies contains demographic information, test scores, undergraduate education,
and career information. This provides a base for researchers who study college quality as they
can measure labor market outcomes of education over time from various angles.
Because these studies require long-term data, the most recent information available is
the series of Baccalaureate and Beyond Studies (BBS) of the early 1990s used by Thomas
(2000, 2003), Thomas & Zhang (2005a) and Zhang (2005). The data from these studies is
obtained from the National Postsecondary Student Aid Study (NPSAS) which gathers its data
from students enrolled in a four-year college at the time of the study. The first BBS series
followed a sample of participants who received their bachelors degree in 1992-1993 who are
periodically interviewed in subsequent years to observe their educational and work experiences
through 2003. Studies on college quality use the BBS follow-up surveys of 1994 (Thomas,
2000; Thomas & Zhang, 2005a) and 1997 (Thomas, 2003; Thomas & Zhang, 2005a) to measure
various returns to education based on factors such as race, gender, major, and parental
education. A newer series of BBS studies is currently in process using a 2000 cohort of college
students (Baccalaureate and Beyond Longitudinal Study, n.d.). So far, this data has not been
analyzed for returns to education in the literature surveyed.
Another widely used database is the National Educational Longitudinal Study (NELS)
which follows students beginning in high school. This study sampled students who were in 8
th

grade as of 1988 and, similar to the BBS studies, are periodically re-surveyed through 2000
(Long, 2008, 2010; Smith, 2013; Dale & Krueger, 2002; Brewer et al, 1999 ). This sample is
usually used in the literature in conjunction with other data. Long (2010), for example, used this
sample along with two other high school studies, the High School and Beyond (HSB) Survey of
1980 and the National Longitudinal Study (NLS) of the High School Class of 1972. This was
done in an effort to gather a representative sample of high school seniors from three cohorts that
are ten years apart. Smith (2013) used this sample along with College Board information on
where students sent their SAT scores.
The remaining research on college quality uses national survey data dating back to the
1970s and 1980s and is mixed between high school and college cohorts (Dale & Krueger,
2002, 2011; Black & Smith, 2004; Monks, 2000; Brewer, et al., 1999; Rumberger & Thomas,
1993). Similar to previously mentioned studies, several national databases are concurrently used
as a way to gather a representative sample and analyze different levels of outcomes. Dale and
Krueger (2002) used the NLS together with the College and Beyond Survey (C&B) and the
Student Descriptive Questionnaire from the SATs. NLS was used for student demographics and
colleges students applied to while the SAT Student Descriptive Questionnaire provided
information on parental income and class rank. C&B was used for information on private and
public school attendees and a mail order survey from C&B was used to determine post-college
earnings, other schools applied to, the results of the application, and the students' current
occupation.
Black and Smith (2004), Monks (2000), and Arkes (1999) used the 1979 National
Longitudinal Survey of Youth (NLSY) for students who were 14-21 years old at the time and
followed up on an annual and biannual basis until 1998. They used this survey along with the
Armed Services Vocational Aptitude Battery Test (ASVAB) to study pre-college abilities by
demographics, understand how students sort into colleges, and what a college education does for
human capital. Other surveys used in college quality literature include the 1987 Survey of
Recent College Graduates (Rumberger & Thomas, 1993). Again, all such data is used
concurrently with other databases to strengthen results. It is important to note that student-level
inputs are not frequently critiqued in the literature as they all measure similar data at different
points in time.
As these data sources are from national databases, they hold more information than
needed for studies on college quality and labor market outcomes. Researchers used them as a
base to manipulate the data and form the sample population needed for the study. From the
literature surveyed, studies use students who have graduated college with a bachelors degree (i.e.
attended a 4-year college), are not pursuing another degree at the time of the study, and do not
already hold a graduate degree (Smith, 2013; Long 2010, 2008; Black & Smith, 2004; Thomas &
Zhang, 2005a; Thomas, 2000, 2003; Zhang, 2005; Dale & Krueger, 2010, 2008; Brewer et al,
1999; Monks, 2000; Rumberger & Thomas, 1993). Studies that specifically examine the effect
of college quality on earnings restricted their sample to participants who are employed at the
time of the study. The Baccalaureate and Beyond samples only include participants who hold a
full-time job and earn between $1,000 and $500,000 a year (Thomas, 2000, 2003; Thomas &
Zhang, 2005a; Zhang, 2005). These restrictions provide researchers with a better level of
confidence that the results will not be affected by factors other than what is being
measured. While all studies record student demographic data, some oversample certain
races/ethnicities to establish a large enough sample size. Monks (2000) and Rumberger and
Thomas (1993) noted that because black and Hispanic students tend to have lower college
enrollment rates, they are oversampled in their studies. Similarly, Dale and Krueger (2011) use
the College & Beyond survey to include information on all private school respondents but only
certain respondents from public schools (i.e. minorities, varsity-letter winners, SATs
1350+). Research on college outcomes of twins includes an extra step of identifying participants
by matching student records either based on address, last name, high school attended, and
address (Smith, 2013) or sampling from a twin database (Behrman, Rosenzweig, & Taubman,
1996).
School-Level Source Data
Institutional data examines information on school characteristics and is matched to
student data of where the sample population indicated that they attended college. One popular
sample of institutional data is the Integrated Postsecondary Education Data System (IPEDS)
which gathers data on college characteristics from the US Departments National Center for
Education Statistics (NCES) (About IPEDS, n.d.). This system data contains school-level
information on enrollment rates, graduation rates, faculty/staff, cost of attendance, and financial
aid. It is used in Smiths (2013) study on educational outcomes of twins and Longs (2008)
study on college quality. It is also frequently used by Thomas (2000, 2003), Thomas & Zhang
(2005a), and Zhang (2005) in their study of labor market outcomes of higher education
quality. This data is used to measure school characteristics of the colleges their sample of
students applied to in the Baccalaureate and Beyond Study as previously discussed. Because
IPEDS only includes institutions that report their characteristics with this database, not all
colleges are included. In these studies, researchers only include students who attend an
institution with data reported to IPEDS (Thomas, 2000, 2003: Thomas & Zhang, 2005a; Zhang,
2005).
Similar to the manner in which student-level data is used, school-level data also uses
several sources to create a robust sample. Thomas (2000, 2003) studies on college quality uses
the Annual Survey of Colleges compiled by the College Board concurrently with IPEDS data to
get more information on applications and enrollments. The College Boards survey is also used
by Rumberger and Thomas (1993) in their work, supplemented with Astins institutional
selectivity ratings. While Barrons Profiles of American Colleges is mainly used as a tool to
determine college quality rankings, it is also used by several researchers for school-level data
(Long, 2008, 2010; Thomas & Zhang, 2005a; Zhang, 2005).
The College and Beyond Survey is used frequently in Dale and Kruegers (2002, 2011)
research, however, it is not without its critics. In their 2011 follow-up study to the return of
college selectivity, they note that the majority of schools listed in the College and Beyond
Survey are selective and not representative of the national average. The average SAT score
among the 27 schools in the sample was 1175 and fall into Highly Competitive or Most
Competitive categories of Barrons rankings. While Dale & Krueger (2011) ascertained that this
does not impact their results of earnings by school selectivity, they acknowledge that the study
does not take into account the results of attending less selective schools. This series of studies
also yields different findings to college quality research questions possibly because of the sample
used.

Selection Bias
An important factor to consider when measuring returns based on college quality is
selection bias (Black & Smith, 2004; Brand & Halaby, 2006; Behrman, Rosenzweig, &
Taubman, 1996; Monks, 2000; Dale & Krueger, 2002; Long, 2008; Brewer, Eide, & Ehrenberg,
1999). Long (2008) explains that student outcomes are based on college quality, cost of
attendance, individual attributes, family attributes, and neighborhood characteristics. As is
evident, a number of these factors are not a result of college quality directly. If factors other than
institutional characteristics impact student educational outcomes, studies that do not account for
these other factors will be biased. A major shortcoming of earlier college quality studies is that
they do not account for the non-random selection of students into colleges (Black & Smith,
2004). Black and Smith identify a lack of control for pre-existing student characteristics that
affect student sorting into colleges and ability that affects school and labor market performance.
Research in the 1990s regarding returns to elite colleges began to identify the shortcomings of
earlier studies that concluded graduates of elite colleges experience higher labor market returns
than peers in other schools but did not control for selection bias (Brand & Halaby, 2006).
Selection into college is a two way street (Monks, 2000). Not only do students pick
schools based on their potential earnings and opportunities but schools admit students based on
their ability, and sometimes financial status. The selection criteria colleges use for admissions
may be the same or similar to qualities that predict student success (Dale & Krueger, 2002). In
other words, the reasons that schools choose to admit students may be the same reasons they are
more successful in the marketplace than students from less competitive colleges. They are not
necessarily more successful as a result of the college itself. Additionally, certain student groups
may be more likely to apply to selective colleges in the first place. For instance, Griffith and
Rothstein (2009) look at the factors that influence how and why students choose to apply to
selective four-year schools. They find that low-income students are not as likely as high-income
students to apply to selective four-year schools. Their findings indicate that this is not necessarily
a result of income level but rather distance from high quality institutions. Studies have tried to
account for this non-random selection by conditioning for certain pre-determined observable
characteristics (Black & Smith, 2004).
The impact of selection bias likely influences a number of the differential returns to
education by student group that will be discussed in more detail later in this paper (Behrman,
Rosenzweig, & Taubman, 1996). For instance, selection bias may play a role in choosing to be in
the workforce, particularly for women who may be less inclined towards a career once they reach
childbearing age. If not accounted for, this could skew findings on female employment. The
human capital measurement of the value of education is also impacted by selection bias.
Behrman et al. cite Ben-Porath (1967) as the creator of a three input model to the human capital
production function that begins with the human capital that is bestowed upon an individual. The
second is the amount of time the individual invests in their own human capital development and
finally, human capital inputs that are purchased either privately or publicly (e.g. public
education). Most early research that looks at this production function limits the evaluation to a
particular level of schooling and does not account for inputs beyond school such as family
attributes and parental endowments. It is possible that student outcomes are related to
unmeasured qualities and go undetected in studies, thereby wrongly attributing outcomes to a
measurable input rather than the input that is present but unmeasured.
Controlling for selection bias is extremely difficult (Monks, 2000). Although researchers
are aware of the role selection bias plays, controlling for it continues to pose an issue in
measuring student outcomes (Brand & Halaby, 2006). In their findings, Brand and Halaby
strongly reiterate that their controls for selection bias are limited to observable student
characteristics and therefore may not take unobservable qualities into consideration. Dale and
Krueger (2011) conducted a study that includes two models: a basic model that only controls for
standard, observed measures of student ability and a self-revelation model that controls for
standard, observed measures, and some unobserved. However, they do not claim to have been
able to control for all unobserved measures. Findings on returns to education that involve
potential selection bias, particularly those that do not even attempt to control for it, should be
interpreted carefully.
Research Methods
Similar to the methods used to calculate college quality, researchers use a diverse set and
combination of methods to evaluate the returns to education. The most common method used in
research on college quality is single-level modeling using an Ordinary Least Squares (OLS)
method (Rumberger & Thomas, 1993; Thomas, 2003). This method is popular because much of
the research seeks to understand the effect of quality on earnings or completion outcomes by
individual-level characteristics; OLS is most appropriate in these cases. Because these studies
have varying levels of complexity due to factors like selection bias, researchers normally take on
a multilevel approach. In the relevant literature, OLS is coupled with Hierarchical Linear
Modeling (HLM) (Rumberger & Thomas, 1993), Generalized Least Squares (GLS) (Thomas &
Zhang, 2005a), or other method(s) (Long, 2008, 2010; Smith, 2013; Behrman, Rosenzweig, &
Taubman, 1996; Brand & Halaby, 2006; Black & Smith, 2004; Brewer, Eide, Ehrenberg,
1999). The only study that uses OLS as a standalone method is Zhangs (2005) study on the
implications of using various measures of quality for simplicity of the study.
In earnings studies, OLS is used to estimate earnings by demographic variables and
HLM is used to determine differences within and between schools (Rumberger & Thomas,
1993). These methods yield similar results and complement each other to paint a more clear
picture of the effect of quality between students in the sample and between schools or students
within the same school. Thomas and Zhangs (2005a) research on wage effects four years after
college believe that using OLS and a GLS method together is the most effective way to
determine changes between two points of time. In a study on the combination of college major,
quality, and performance on school debt to earnings ratios, Thomas (2000, 2003) uses HLM
modeling as the sole method. This method is used to measure demographics, education, and
labor market experiences in one set of variables in order to compare them to a set of family
background dummy variables (Thomas, 2000, 2003). This approach is most appropriate in this
study as his research looks to understand whether there are non-school related variables that
impact the cost-benefit analysis of attending college.
Dale and Krueger (2002) credit Brewer et al. (1999) with addressing the issue of
selection bias using a reduced-form multinomial logit model. They also attempt to address this
in their method of matching students who are accepted and rejected from the same schools. As
these students are comparable in their observable characteristics, they also implement a
selection-adjusted model to hold SAT scores constant of the school they applied to, went to, and
their own SAT score. Dale and Krueger (2011, 2014) replicate this study in a follow-up of the
same cohort and include a newer cohort group in 2011 and 2014; they arrive at the same
conclusion in each study.
Black and Smith (2004) criticize studies that only use linear regression as a method to
determine college quality. They employ a matching propensity score method in which they
attempt to predict the probability of a student attending a high quality versus a low quality
college. They compare the findings using this method to a linear regression model and find that
the effect of college quality on labor market outcomes is the same. They also find evidence that
matching estimates have larger standard errors than OLS methods.
Because of the myriad of methods used in college quality studies, Long (2008)
conducted a study using four methods for comparison to determine earnings and degree
completion outcomes: a regression model, instrumental variable method, Dale and Krueger's
method, and Black and Smiths method. He used OLS to regress quality and student
characteristics. The instrumental variable method uses the quality of the closest college within a
students residence as an instrument of the quality of school the student ultimately attends; this
proved to be a strong predictor of quality as students are often faced with the choice of attending
college close by due to cost. The Dale and Krueger and Black and Smith methods were both
used in Longs (2008) study as designed in their original studies but expanded to include degree
attainment as an outcome and a broader set of quality metrics. Although the Dale and Krueger
method is criticized for not being nationally representative, it is used as such in this study. The
Black and Smith (2004) method is also criticized for its sample size. The second and third-
quartile colleges are dropped from the study in an effort to obtain a sample of only bottom rated
and top rated colleges (Long, 2008). Essentially, students in the remaining sample are said to
have been administered treatment but the sample is largely reduced because of this criteria
(Long, 2008). Nonetheless, all methods show an outcome consistent with previous research or
the methods previous conclusions.
Other methods include Longs (2010) regression logarithm to study various outcomes
of college (earnings, family implications, civic engagement and college completion) by student,
parent and neighborhood attributes. Monks (2000) takes an approach different from other
studies by using an economic model that follows human capital and signalling theories. He uses
a regression log of wages in his approach under the assumption that attending a certain college
relates human capital outcomes to wages and arrives at the same conclusion as most other
studies. In his studies of twins, Smith (2013) uses a regression model in the traditional sense
along with a fixed effects model to difference out family effects on outcomes of degree
attainment.
Resume Audit Studies. As discussed earlier in this paper, the criteria employers use to
make hiring decisions is likely a combination of both observed and unobserved characteristics.
One of the shortcomings of traditional labor market outcomes measurements is the inability to
account and accurately control for all of the different factors that may play into an employers
choice of who to hire (Bertrand & Mullainathan, 2003). Resume audit studies offer an alternative
method by replicating actual hiring practices. Other methods used to measure labor market
outcomes are typically unable to examine the role of discrimination in hiring (Heckman &
Siegelman, 1993). Audit studies also allow researchers to explore more nuanced factors of labor
market success such as school quality and GPA whereas other measures are limited to less
precise parameters such as years of education.
One approach to conducting an audit study is to inform the subjects of the purpose of the
research as seen in Cole, Rubin, Feild, and Giles (2007) and Heimstra, Derous, Serlie, and Born
(2013). A benefit to having an informed resume rater is that the researchers are able to hone in
on specific aspects of resumes that impact employer decisions (Cole et al., 2007). In both of
these studies, informed recruiters or employers were asked to rate real resumes on areas
identified by the researchers. A second method in audit studies is to actually apply to jobs
without informing the employer in order to mimic more realistic hiring circumstances. This
approach is seen in Bertrand and Mullainathan who use actual job seekers resumes to apply to
advertisements in Boston and Chicago newspapers. They created a bank of resumes and implied
racial identity using names that their research indicated were associated primarily with either the
caucasian or African American race. Ghayad (2013) and Kroft, Lange, and Notowigo (2013) use
a similar approach to evaluate how employers react to unemployment on a resume. Ghayad
limits his research to administrative, sales, and professional positions in four industries: Financial
Activities, Wholesale and Retail Trade, Professional and Business Services, and Education and
Health Services. Implying a particular racial, ethnic, or social identification through applicant
name and activity on a resume is also employed by Derous and Ryan (2012) and Drydakis
(2009).
Using real resumes is common practice in resume audit studies (Bertrand &
Mullainathan, 2003; Derous & Ryan, 2012; Kroft et al., 2013; Cole et al., 2007; Heimstra et al.,
2013). A more recent innovation for resume audit studies is an automated computer software
created by Lahey and Beasley (2009) and used by both Johnson and Lahey (2011) and Ghayad
(2013) to create applicant materials. Resume audit studies performed using a computer-generated
program helps to resolve the issue of template bias by creating and matching resumes for the
researcher (Lahey & Beasley, 2009). The software utilizes a web-based outline created by the
experimenter to define and input particular characteristics in the resume. Then, using the
experimenter-defined characteristics to generate and record the resume information, the
researcher chooses which job to apply to and the software generates a resume without the input
of the experimenter. The program creates and stores the characteristics and date of the resume. It
is also capable of producing cover letters. An outline can be set up to match resumes for paired
audits studies and multiple matched resumes can be sent. The program saves choices made in
creating a resume which can be re-created in later sessions.
It is important to note that audit studies are not without fault and do have some
shortcomings (Bertrand & Mullainathan, 2003; Heckman, 1998; Heckman & Siegelman, 1993).
First and foremost, audit studies are not randomized (Heckman & Siegelman) and tend to be
expensive (Bertrand & Mullainathan, 2003). Audit studies often assume that hiring is a linear
function which may not actually be the case (Heckman, 1998). Depending on the method used,
some audit studies are not double blind which could bias the decision making and actions of the
subjects involved (Bertrand & Mullainathan, 2003). The reliability of an audit study is
contingent on the fact that researchers are able to create identical profiles for all participants
other than the variable they wish to examine (Heckman & Siegelman, 1993). This assumes that
researchers can identify and control for all of the factors that employers use in evaluating an
employee which is likely not possible. However, following Heckman and Siegelman's
commentary on the inability to control for unobserved variability between applicants, Neumark
(2010) creates an equation that can still generate accurate results. He then applies that method to
Bertrand and Mullainathan's (2003) study to not only confirm but also strengthen their findings
on the presence of racial discrimination towards African American's in the labor market. He
explains that the proposed method can also be utilized in future audit studies by intentionally
creating different resumes rather than trying to make them all identical except for a single
variable
1
.

1
See Appendix A for a summary of all resume audit study methods.
Labor Market Outcomes
Measures of return to college quality include graduation rates, employability, earnings
potential, and social returns. The results of college outcomes are not homogeneous across
groups. The quality of the college attended has a different, and sometimes an opposite, effect on
different groups of students. A students race, major studied, gender, socioeconomic
background, parental characteristics, and school control (public or private) all have a bearing on
the outcomes of their education.
College Completion
Before discussing the effect of college quality on student outcomes after degree
completion, it is necessary to examine the impact of quality on their ability to graduate. This is
important to understand as the literature discusses the attainment of a degree as a signal to
employers about an applicants abilities (Arkes, 1999; Spence, 1974 as cited in Thomas &
Zhang, 2005a). The most recent study on this topic finds that a students probability to graduate
college in four years increases by 5% when attending a high quality institution (Smith,
2013). Smith defines institutional quality by average SAT score and designates a 100 point
increase between a high quality institution and a moderate quality institution. Enrolling in a
moderately selective college over a less selective college has an even larger effect; the
probability to graduate increases by 10%. Long (2010) arrives at the same conclusion in his
study of three cohorts graduating high school ten years apart. One standard deviation increase of
quality in his study equates to a 5%-8.5% increase in the likelihood to graduate in each cohort
sample. Overall, this effect is supported by findings in other studies (Long, 2008; Brand &
Halaby, 2006; Light & Strayer, 2000) but it is important to note that results of quality on college
completion cannot be generalized to all groups of students as discussed in the student
differentials section of this paper.
Student ability and unobservable characteristics that are unrelated to school quality are
also found to have an impact on graduation rates. SAT score, high school rank and family
background influence degree attainment (Kane & Spizman, 1994). Students who have the
scholastic ability (as measured by SAT scores) to enroll in a selective college but choose a less
selective school experience a decrease in their probability to graduate (Smith, 2013), sometimes
by as much as 40% (Cohodes & Goodman, 2012, as cited by Smith, 2013). However, a student
of lower ability who enrolls in a more selective institution does not increase their chances of
graduation (Smith, 2013). In fact, another study using the Armed Forces Qualifying Test to
examine ability shows that this decreases their chances of graduating due to a mismatch between
student ability and school quality (Light & Strayer, 2002). It also supports Smiths finding that
high ability students have a decreased chance of graduating from a low quality college, although
their findings show a much smaller likelihood than Cohodes and Goodmans (2012) 40%
decrease. The study concluded that a fit between student ability and school quality optimizes
graduation rates (Light & Strayer, 2002).
Unobservable characteristics not measured in these studies are also thought to have an
influence over graduation rates. Student motivation may have an impact and admission boards
may draw conclusions about a student based on their application essay; neither of these attributes
are quantified in school quality studies (Smith, 2013). One way this is addressed in the literature
is by grouping students who applied and were accepted or rejected from similar colleges (Long,
2008). Using a fixed effects model on twins, Smiths (2013) findings mirror other studies on
twins and inferences that unobservable traits such as family effects do not have a statistically
significant impact.
Employability
Most studies on college quality address labor market outcomes such as earnings,
completion, and other returns. No studies focus specifically on the intersection of quality and
post college employment; rather, education is discussed as an important prerequisite to
employment. Additional years of schooling are found to increase wages and labor force
participation but the results vary across student groups (Long, 2010). The College Board (as
cited by Smith, 2013) noted that college graduates have better chances of employment. Card
(1999) echoes this in his study as individuals in his sample with more education experience less
unemployment and attain more prestigious jobs than non-graduates. Brewer et als (1999) cohort
sample of college graduates was at least 84% employed at the time of graduation but the study
does not explore whether that is a reflection of the type of institution attended. Arcidiacono
(2004) loosely addresses this subject as he notes that high quality colleges make well-paid jobs
more attractive and students who choose such types of jobs, particularly in natural sciences, are
more likely to be employed. This infers that quality and employment may be related but the
correlation is not examined. Further research is needed in this area to analyze whether a
correlation exists to understand how quality impacts the likelihood of obtaining employment
after graduation.
Because resume audit studies are typically focused on employment, we find it most
appropriate to include those findings here. Audit studies that examined the impact of
unemployment on future employability found that unemployment spells of six months (Ghayad,
2013) or eight months (Kroft et al., 2013) decrease the likelihood of getting hired. Both authors
suggest that this is the result of a signaling or screening model used by employers to make
assumptions about workers who have not recently been employed, regardless of their actual
qualifications or ability to perform the job well. The strength of the labor market probably also
plays a role in how unemployment impacts employability (Kroft et al.). Using actual job seeker
resumes with implied racial identity, Bertrand and Mullainathan (2003) found that African
American job seekers were less likely to get callbacks for interviews than white candidates. The
authors cite this as evidence that poor labor market performance for African Americans is at least
in part due to labor market discrimination by employers.
Hiemstra et al. (2013) and Cole et al. (2007) conduct resume studies that use informed
raters to evaluate resumes, allowing for a more in-depth look at specific resume components.
Hiemstra et al. explore why it takes longer for non-western graduates to find employment
compared to their western peers. Their findings imply that lower levels of extracurricular
participation, demonstrated leadership, and internship experience of non-westerners make their
resumes less appealing to employers. Although discrimination in hiring may be a factor,
Hiemstra et al. conclude that extra time needed for non-western graduate students to find a job is
quite possibly a result of lower levels of human capital as expressed through a resume. They also
make the observation that both applicant and employer characteristics should be considered in
audit studies. Cole et al's (2007) results indicate that when student resumes demonstrate
excellence in academics, extracurriculars, and work experience, employers do not place
emphasis on one area over another. Additionally, when one of the three areas demonstrates
significantly more success than the other two, it did not appear to hurt the employers perception
of the student. Cole et al. also found that employers were interested not just in the quantity of
items on a resume but also the relevance that experience had to the position available. When
asked which areas were most important for making hiring decisions, employers typically ranked
in the order of work experience, academic ability, and then extracurricular activities (Cole et al.,
2007). However, their actual ratings were inconsistent with their perceptions of their priorities
which indicated positive ratings for strong extra-curriculars, no impact on ratings for work
experience and negative impact for academics. This finding may be important for future research
on college quality and the necessity to control for resume content.
Earnings
While individual measures such as major and GPA have an effect on an individuals post-
college earnings (Rumberger & Thomas, 1993), many studies find that institutional quality has a
significant role on this outcome (Black & Smith, 2004; Long, 2008, 2010; Monks, 2000; Brewer,
1999; Thomas, 2000, 2003; Rumberger & Thomas, 1993; Behrman, Rosenzweig, Taubman,
1996). The strength of that relationship, however, varies by study. Some studies found that
school quality has a significant effect on earnings (Long, 2008; Behrman, Rosenzweig, &
Taubman, 1996, Brewer at al, 1999, Rumberger & Thomas, 1993) while others find that it has a
small but statistically significant effect (Zhang, 2005; Thomas, 2000). Using an OLS technique,
Rumberger and Thomas (1993) conclude that school quality significantly influences future
earnings as measured by Astins selectivity ratings. This finding is supported by Longs (2008)
study on early adult outcomes that finds a positive, significant increase in earnings, particularly
on couples earnings, as a result of a high quality education. His follow-up 2010 study includes
the same student sample and introduces two additional samples in order to study three cohorts
that are ten years apart. This is noteworthy because each cohort generates the same results
except for the oldest cohort which experiences a preliminary dip in earnings in its early years out
of college; ultimately this cohorts earnings show a significant, positive effect by the 14th year
out of high school (Long, 2010). Brewer et al (1999), who also compared several cohorts to each
other, found a consistent increase in earnings. This study focuses on whether higher returns exist
only at four year colleges of certain types and finds that there is a labor market wage premium to
attending an elite private institution compared to a bottom rated school (Brewer et al,
1999). Middle-rated private institutions also yield higher earnings compared to lower quality
institutions (Brewer et al, 1999). Monks (2000) expanded this research question by comparing
liberal arts schools to research universities and finds similar results. Thomas (2003) notes that
students from highly selective, private schools enjoy a 12% earnings advantage over their
counterparts who attend a lower quality institution. While the literature surveyed indicates a
significant impact of school quality on future earnings, many note that the results vary in strength
by students of certain demographic groups as examined in the differentials section of this paper
(Rumberger & Thomas, 1993; Thomas, 2000; Brand & Halaby, 2006).
Long-term studies find that the impact of institutional quality becomes more
pronounced over time. College quality does not have a profound effect during the early years
after graduation but stronger effects on earnings emerge later on (Thomas & Zhang,
2005a). Thomas (2003) and Thomas and Zhang (2005a) both note that these effects are much
more apparent four years after college graduation than during the first year. This supports
Brewer et als (1999) cohort results which showed a 9% wage increase three years out of college
and 15% increase fourteen years out of college. Conversely, in a more recent study, Thomas
(2000) determines that quality continues to affect initial earnings but at a much lower rate than
previously reported. Brand and Halaby (2006) also note that quality increases initial job status
but the results on earnings are mixed.
Dale and Krueger are perhaps one of the only researcher teams to find that quality does
not impact earnings. In their 2002 study they determined quality based on the types of schools
students were accepted to and rejected from and found no correlation between higher selectivity
and earnings once they controlled for selection. They did find that higher net tuition impacts
earnings, but this may be used more as a signal to employers during the hiring process than an
indication of student ability. Dale and Krueger's (2011, 2014) follow-up studies finds similar
results and concludes that the results of earnings show that there is an impact to quality only
when unobservable student characteristics are not controlled for. Their findings, however, may
be restricted to the sample used. The types of schools in the College & Beyond Survey are
selective colleges that show average earnings of $84,219. Since this sample is not nationally
representative, while other samples are, it may be the reason that it is one of few studies that find
a lack of impact on school quality on earnings.
Private and Public Returns
In addition to degree attainment and other post graduation outcomes, a college education
is found to deliver both personal and social returns to society. These outcomes are not
researched as extensively and are not evaluated in terms of quality of education but are proven to
be linked to more years of schooling (i.e. completing college). Hout (2012) found that generally,
people who have graduated college tend to be more happy, healthy, have a greater life
expectancy, and a more stable family life. Long (2012) supports the family life claim as he finds
that divorce rates decrease among college graduates. In his study of three cohorts that are ten
years apart, Long also finds that each year of education led to a greater delay in marriage and
having children. This outcome is most prevalent in the oldest cohort which graduated college in
1979; younger cohorts experience a diminished effect on these outcomes from a college
education, but the finding is still significant (Long). This does not indicate that more years of
schooling leads to a decrease in marriage and childbearing across the United States. It means
that college-educated individuals are simply waiting longer to take a step towards these
milestones. Other findings on personal returns support Houts (2012) results that college
educated individuals lead a healthier lifestyle; they are also more likely to have insurance (Smith,
2013).
Higher education also impacts public returns that have an effect on society as a whole.
Hout (2012) found that college graduates have lower crime rates and the College Board results of
2012 (as cited in Smith, 2013) note that college returns include an increase in voter turnout and
volunteering. Other research also supports the claim of an increase in voter registration (Hout,
2012; Long, 2010). An important finding to note is that Longs (2010) study on college
outcomes found an increase in the oldest cohorts registration to vote but a diminished positive
increase in the younger cohorts studied. He does not provide an explanation on the cause of this
finding but there may be historical and political indicators of this finding outside of the scope of
college outcome studies. Additionally, a criticism of studies on private and social returns to
college completion is that they conclude that attending college is the reason for the outcomes
(Hout, 2012). Hout, however, notes that this may not necessarily be the case. Students who
choose to go to college may already be more inclined to partake in activities that contribute to
society or to ones own lifestyle, again reiterating the presence of selection bias. These
inclinations may be the reason they apply to college in the first place and are correlated with a
college degree rather than an outcome.

Differentials
There are a number of individual and institutional variables beyond school quality that
may lead to differential labor market outcomes. These include gender, race/ethnicity, major, type
of school, and parental characteristics including socioeconomic status (SES) and education
attainment. Results are not the same across student groups (Dale & Krueger, 2002). In order to
maximize earnings potential, students may not need to choose the most selective school that they
were accepted to, depending on their individual characteristics and what the school has to offer.
For instance, a student who wants to follow a career path that is only offered at the less selective
school they are accepted to would be better off going there. Essentially, the fit matters, and a
better understanding of returns for each demographic group will help students to make more
informed decisions to maximize their education investment and potential for larger returns
according to individual characteristics.
Race. Findings on race differentials regarding returns to education are often conflicting
with some studies reporting greater returns to more selective schools for non-white students
(Monks, 2000; Dale & Krueger, 2011) while others reveal the same (Thomas & Zhang, 2005;
Rumberger & Thomas, 1993) or lower returns (Smith, 2013). Historically speaking, differences
in education attainment have long been considered a factor in the earnings gap between black
and white workers (Thomas & Zhang, 2005a). Thomas and Zhang find that there are no
significant earnings differentials between black and white college graduates when college quality
is controlled for, implying that when education credentials are equal, race is not a determining
factor in labor market outcomes. Using a regression model of measurement, Rumberger and
Thomas (2003) come to a similar conclusion. Interestingly, some studies suggest that minority
students from highly selective schools have higher earning premiums than white students
(Monks, 2000; Dale & Krueger, 2011). In Dale and Kruegers estimates, this remains true even
after the quality of the school based on SAT score has been controlled for. If the Kolpin and
Singell (1997) finding is true that new race blind policies might mean fewer minority students
are accepted to selective schools, then the minority students who do graduate from more
selective institutions will benefit even more than otherwise (as cited in Monks, 2000).
According to Meisenheimer (1990, as cited in Kane & Spizman, 1994), in comparison to
black students with only a high school degree, African American students with a college degree
earn 1.5 times more, further indicating the importance of college access to minority groups in
order to close earnings gaps (Kane & Spizman, 1994). Longs (2010) finding that the largest
returns for more time invested in college education accrued to blacks, Hispanics, and men imply
that years of education are also a likely contributing factor to earnings gains. However, there are
recent conflicting findings indicating that black, Hispanic, and Asian students are less impacted
by selectivity than whites, conflicting with earlier research (Smith, 2013). More research needs
to be conducted to determine more conclusive findings regarding returns to education by race.
Major. There was a major upwards shift in returns to college education in the 1980s as
measured by earnings in the labor market (Grogger and Eide, 1995). Grogger and Eide reveal
that, for male workers, this is a result of more students choosing high-skill college majors than
low-skill majors. Their calculations indicate that the pattern shift in area of study accounts for as
much as 25% of the overall increase in wage premium for men. Using an HLM model to
measure differentials in returns by major, Rumberger and Thomas (1993) find that education,
social sciences, and humanities yield the lowest earnings. Engineering and health majors have
the highest earnings followed by students who studied science, math and business. In health and
engineering, females experience an even greater differential than men. This finding holds true in
a more recent study that reveals business, engineering, and health majors all continue to have a
very large and positive effect on earnings (Thomas and Zhang, 2005a).
Unlike most other studies on returns by college major, Arcidiacono (2004) studied factors
that drive student choice in selecting a major. Although other studies do consider selection into
particular schools, no other at this time accounted for selection bias into fields of study. He found
that, once selection is controlled for, there are still much larger financial returns to majoring in
business and natural sciences as compared to other majors, implying that certain fields are likely
to be more lucrative than others regardless of the types of students who choose to enter them. To
try and further understand sorting between majors, Arcidiacono, Hotz, and Kang (2012)
collected student responses regarding their expected earnings for both their selected major and
for other majors. Calculations indicate that better estimates of returns by major for Duke students
(those surveyed in the sample) specifically would lead to 7.8% of students changing their major.
Their findings also indicate the importance of students' understanding of what the returns for a
major are specific to the school they are attending. Perhaps James, Alsalam, Conaty, and To
(1989) summarize it best: "...while sending your child to Harvard appears to be a good
investment, sending him to your local state university to major in Engineering, to take lots of
math, and preferably to attain a high GPA, is an even better private investment" (p. 251-2).
Essentially, what you study and learn while in college is more important than where you go.
Gender. College selectivity has a greater impact on both graduation rates (Smith, 2013)
and earnings (Black & Smith, 2004) for men than women. The labor market returns to attending
a high-quality college instead of a low-quality college are estimated to be between 11% and 12%
for men while female earnings only increase by 7.5% (Black & Smith). Rhumberger and
Thomass (1993) findings also indicate that attending a more selective college increased earnings
for both men and women. However, their calculations yield increases of 4% for women and 3%
for men per 100 point increase of a schools average SAT score. Using four individual measures
of college quality, Long (2008) found that combined overall quality was the most important
factor for increased hourly wages early in a students career. Findings also implied that higher
net tuition yields greater hourly wages for men but most of the results on the impact for women
are insignificant. Gender differentials vary by type of school as well. Males have a greater return
than females for attending private schools (Rumberger & Thomas, 1993) and universities that
grant graduate degrees whereas females earn more if they go to specialized institutions (Monks,
2000). Both men and women experience higher earnings differentials if they attend a graduate
degree granting university rather than a liberal arts school although the differential is even
greater for men. GPA has a significant impact on salary for females but not males. Even once
major and job are controlled for, women still earn less than men (Rumberger & Thomas, 1993).
Human capital and occupational crowding theories posit that women are more likely to choose
female occupations (Thomas & Zhang, 2005a). Because such occupations are fewer in number
and there is a surplus of women who want to work them, it depresses womens wages, perhaps
leading to gender differentials in returns to higher education. This is evident in the growth of the
male/female earnings differential from 6% to 11% in just three years between 1994 and 1997 and
according to the most recent findings (Smith, 2013), remains true today (Thomas & Zhang,
2005a).
Socioeconomic (SES) Status. Overall, the positive returns to education are significant
for students of low socioeconomic backgrounds (Long, 2010). Dale and Krueger (2002) find that
students with income in the bottom percentile have an 8% return for choosing a more selective
college with a 200 point higher average SAT score. Selectivity appears to have no impact on
earnings for students from families with mean income. One thing to consider is that students who
go to more expensive schools may have higher levels of family wealth so, if not properly
controlled for, studies that look at how tuition impacts earnings may also be factoring in financial
background. Long (2010) finds a significant impact of college quality on the likelihood of
graduating with a bachelors degree for low-SES students, an effect that has increased over time.
Surprisingly, college quality decreases voter turnout for all demographic groups between the
1982 and 1992 high school graduating cohorts, a finding that was significant for mid-SES
students. Over time, the impacts of college quality on waiting to have children has gone up for
mid and high-SES groups and increases the likelihood that high-SES students will delay
marriage.
The finding that students from less-elite backgrounds experience greater returns from an
elite college compared to students from elite backgrounds is evident not only right after college
but also in mid and late career analyses (Brand & Halaby, 2006). Findings imply that students
who attend non-elite colleges likely would have had the same labor market returns if they had
gone to the elite school as students who did attend elite colleges. At the mid-career level, there
appears to be no significant benefit to attending an elite college. Late-career findings are not as
clear; regression calculations indicate that returns are greater in late careers as a result of
attending an elite college but this is not consistent across all of their different calculations. The
authors acknowledge significant limitations to their findings including the fact that their sample
is small and that the changing nature of education and the labor market may limit the ability to
generalize findings for their sample of 1957, male high school graduates. Additionally, college
entrance has become more competitive as indicated by overall increases in SAT entrance scores.
School Type. Although the degree of impact varies, numerous studies to date have
demonstrated higher returns to private postsecondary education than public postsecondary
education (Monks, 2000; Behrman, Rosenzweig, & Taubman, 1996; Brewer, Eide, & Ehrenberg,
1999). Monks finds that graduates of private schools earn more than graduates of public schools,
although the evidence is weak and the differential only 4.5%. According to Brewer et al. (1999),
the differentiation between public and private school returns may be based on quality. They find
that, in all cases, attending a selective private institution has a statistically significant wage
premium increase as compared to bottom-tier public schools. However, there is weak evidence
on whether top public schools have the same results. Behrman et al. (1996) take the research a
step further and differentiate earnings between types of public and private schools compared to
high school graduates. Their findings indicate that graduates of large, public state colleges earn
20.3% more than high school graduates while graduates of large, public state research
universities earn 31.7% more than high school graduates. Once selectivity is controlled for, the
public research university is considered to have a greater return because the price for the two is
relatively similar. Wellesley, classified as a private liberal arts school, yields returns of 40.3%
greater than workers with only a high school diploma. Graduates from the University of
Pennsylvania (Penn), a large, private research university, experience returns that are as large as
56.6% greater than high school graduates. Explanations for these large differences include the
small size of Wellesley, and the number of highly paid faculty and graduate programs, which
likely attract higher quality faculty, at Penn. In comparing Wellesley to Michigan, a public-
private comparison, the authors explain that because Wellesley is more expensive, the greater
returns just barely offset the higher cost of education. Monks finds that students from graduate
degree granting and specialized schools earned more than those from liberal arts schools at rates
of 14% and 19%, respectively. Another interesting finding about public and private school
differentials is that increased tuitions at private schools yield greater income returns for
graduates than higher tuition rates at public schools (Zhang, 2005b). Another study done on rate
of return to an elite education finds that this return, although previously higher for private
institutions, has decreased in comparison to public education (Fox, 1993). Fox predicts that this
return to private education will continue to fall in the following years but no studies to date have
found this to be true.
Monk's (2000) research presents interesting findings at the intersection of race and school
type. He found that white graduates of public schools earned less than white graduates of private
schools, similar to the findings mentioned above. However, while Monks found that white
students are rewarded with a greater return to attending a private school than a public school,
returns for non-white students do not differ significantly between the two. The one exception to
this is for non-white, female graduates of competitive, private, liberal arts schools, who
experience an increase in returns. Finally, Monkss results indicate that non-white graduates of
specialized schools earn more than white graduates of specialized schools.
For-profit education. For-profits are a growing area of focus when examining returns to
education (Cellini and Chaudhary 2011, 2012; Chung, 2008, 2012; Deming, Goldin, & Katz,
2013; Lang & Weinstein, 2012; Denise, 2012; Grubb, 1993). Cellini and Chaudhary (2012)
conduct one of the most recent studies on the returns to for profit education using data from the
National Longitudinal Survey of Youth (NLSY) 1997. They control for unobservable student
characteristics using an individual fixed effects model. Results indicate that when employed,
graduates of for-profit colleges earn 10% more than students with only a high school diploma.
When calculated in terms of annual returns per year invested in education though, earnings are
only 4% greater for for-profit students. Some of their estimates do imply that this could be as
great as 8% since these students are more likely to be employed than students with no education
beyond high school. In comparison to community college students, for-profit students generally
experience the same earnings in the labor market. However, graduates of community college
associates programs see slightly higher returns and graduates of four-year bachelors programs
see significantly greater returns. It is difficult to say why students would continue to choose for-
profit programs if they have similar labor market outcomes to community colleges but are far
more costly. One possible explanation is that for-profits offer something different that
community colleges cannot provide. Another suggested explanation is that for-profit advertisers
and recruiters market aggressively to students to get them to attend for-profits. As is the case
with four year colleges, selection bias also poses an issue when measuring for-profit outcomes.
For instance, the authors find that students who complete for-profit programs earn 20% more
than those who begin but do not complete a degree. The authors acknowledge that they may not
fully account for pre-existing characteristics that possibly led the students to drop out that also
make them less likely to get hired. In other words, endogeneity may not be fully controlled for
and therefore the finding should be interpreted carefully. For-profit education is an area that
should be explored in future research.
Parental Characteristics. Dale and Krueger (2011) find that although there is little to
no increase in returns by college selectivity overall after controlling for unobserved student
characteristics, there are positive effects for specific demographic groups. They found that
minority students and those from families where the parents have less education, still experience
large gains by going to a more selective college even after the quality of the school based on
SAT score has been controlled for. They find that students with parents who averaged less than
16 years of completed education experience greater returns than students whose parents had
more education. A suggested explanation for this phenomenon is that children of parents with
less education may be presented with networking opportunities at more selective schools that
they would not have otherwise had whereas it may not make as much of a difference for students
from more advantaged backgrounds.
Conclusion
This review intends to summarize the literature on various aspects of returns to college
and how they apply to different groups of students. A large body of this literature shows that
quality has an impact on student outcomes, especially those of minority status. This largely
depends on the instrument used to measure quality, the sample population, and the methods,
particularly the ability to control for selection bias. No "one-size-fits-all" ranking is possible for
measuring returns to college quality (Dale & Krueger, 2002). It is important that students
consider the fit between their individual and institutional characteristics when deciding what type
of higher education to pursue. Fit lays the groundwork for a successful future of students,
particularly in their ability to gain employment after college. Future research is needed to
understand how this applies to groups of students who are found to benefit the most from an
education of higher quality as they enter the labor market. A recommended direction is to
analyze how minority students are affected by the quality of education they receive in the context
of employability using a resume audit study.


Appendix A
Resume Audit Study Methods

Derous, E., &
Ryan, A. M.
(2012)
Study done on screening of resumes and differences between majority
(Dutch) and minority (Arab) ethnic groups. Used real resumes from job
search website as caliber (experience, education, etc.) and to guide resume
write-ups. Paired resumes and had participants look at how equivalent each
resume was. Ended up with eight different resumes. Responded to 150 job
advertisements and sent four resumes to each job. Only counted those jobs
where a response (positive or negative) was received. Yielded 66% response
rate
Drydakis (2009) Correspondence test in Greece to study the impact of homosexuality on the
likelihood of being asked to return for a job interview. Participants were
identified as homoesesual by a line in their resume that read: "member
volunteer in the Athenian Homosexual Community" (p. 366) while straight
applicants had no sexual orientation identifiers. The resume also indicated
volunteer experience in other, non-sexual-orientation related groups as well
as a date to imply that participation in the Athenian Homosexual Community
had ended. Applied to jobs that were seeking a 40 hour/week employee.
Other than experiences to imply sexual orientation, the resumes were
designed to appear as similar as possible including age, gender, marriage
status, military participation, level of education, and work experience. Sent
both resumes to each job advertisement within a day of each other.
Bertrand and
Mullainathan
(2003)
Responded to help wanted ads in Boston and Chicago Newspapers. Used
actual job seeker resumes but changed them enough so that they did not
compromise the owner but were still believable. They got these resumes from
websites that showed resumes of job seekers. Only used resumes that were
posted at least six months prior. Limited search to: sales, administrative
support, clerical services, and customer services. Switched boston and
chicago resumes and used the same phone number on all resumes to track
callbacks. Created four email address for each but made them generic. Used
fictitious street addresses. Found that, in order to receive a phone call from an
employer, the researchers job applicants with white names had to submit
approximately 10 resumes while those with african american names had to
submit 15.
Ghayad (2013) Submitted 3360 fictitious resumes to 600 job advertisements at specific firms
in four industries (Financial Activities, Wholesale and retail trade,
Professional and Business Services, and Education and Health Services and
then within these administrative, sales, or professional positions). Used the
Current Population Survey to group job applications into those four broad
categories. Sent applications all over the U.S. and used randomized
credentials. Applicants were made to appear relatively young with six years
of experience beyond college. Unemployment/employment varied randomly.
Randomized previous experience so that some had worked in same the field
as the employer. Had a set of e-mail addresses to track employer responses on
a rolling basis. Once they found a job opening, resumes were randomly
selected from the resume bank and sent to the employer over a two day period
Half of the resumes were sent places where they had similar experience and
half where it was different. All profiles were males with names that did not
imply ethnicity or race. No age included but implied six years of work since
graduation. Each resume had two previous jobs listed with three years spent
at each. Few job advertisements had requirements for specific skills like SAS
but they were always added when required. They used schools that were
randomly selected from the same tier (chose this group based on an online
survey that says which schools companies think are the most employable
graduates but does not say what the site was). Always had minimum
requirements for the position. Layouts were randomized so that no two
looked too much alike. Interview requests tracked by matching employer ID
with originally submitted resume with a job number assigned to each position
considered. Employers that declined applicants were briefed about the study.
Those that never replied were informed six months after the resumes were
sent. Resumes were sent between August and December. Identify the
limitation that they can only test so far as whether or not an interview was
granted, not the actual hire. Used templates from Lahey and Beasley (2009)
software. Mixed and matched characteristics from real resumes found on the
web to create new ones.
Hiemstra (2013) Used resumes of 200 recent graduates from campus career counselors. Used a
wide variety of majors and invited 40 Human Resources recruiters and
experts in resume and screening to compare resumes. Recruiters ranged from
a variety of disciplines (business, recruiting agencies). They were told that
they were part of a study to rate resumes. Each recruiter received ten resumes
to rate based on resume characteristics (five Western sounding names and
five non-Western sounding) along with a ten item questionnaire on
themselves. The rating forms included a variety of questions (i.e. expertise in
foreign language). They followed up with a hiring scenario.
Johnson and
Lahey (2011)
Used a computer database with real resume information to generate 8,000
fictitious resumes. They did not include any resumes that indicated an
applicant went to a four-year college. Johnson and Lahey controlled for
gender and possibly other characteristics by limiting all names to either Mary
E. Smith or Linda Jones. All applicants ranged in age from 35-62 and had at
least ten years of experience. Sent two resumes to each of 3,996 job openings
and coded results by whether or not the applicant was asked to interview.
Kroft, Lange, &
Notowigdo
(2013),
Study on the impact of the length of unemployment on ability to get a job
through a resume audit study. Study follows Betrand & Mullainathan, and
Lahey on how to generate fictitious resumes and find postings. Collected
1,200 real resumes from online job boards to inform design (ie. how to
provide dates of employment). In total, created ten resume templates and
selected four to send to employers. Once a resume was used, it was not put
back into the pile to ensure that the the same resume was not sent to a single
job more than once. Work histories were constructed from the sample of real
resumes collected. Applied to 3,000 job postings using 12,000 resumes.
Received 13% response rate. Used a large online job board to send resumes to
the 100 largest Metropolitan Statistical Areas (MSA) in the country. Assigned
MSA and job type to a research assistant to keep up with sending out
resumes. Restricted jobs to those that had no advanced degree required and no
independent outside sales positions. Sent all resumes through a job board and
never emailed to employers directly.
Lahey and
Beasley (2009),
Resume audit studies performed using a computer-generated program that
helps to resolve the issue of template bias (creates and matches resumes).
Experimenter chooses which job to apply for and program generates a
resume, including indicator of group membership, without the input of the
researcher. The program also creates and stores the characteristics and date of
the resume. The program had 2 parts: (1) Web-based outline created by
experimenter that allows researcher to define and input characteristics of the
resume; (2) Then uses information from the experimenter-defined
characteristics to generate and record resume info. Also produces cover
letters. Outline can be set up to match resumes for paired audits and multiple
matched resumes can be sent. Program saves choices made in creating a
resume which can be re-created in later sessions.

*Program can be obtained through author (jlahey@nber.org).
Nuemark (2010) Following Heckman and Siegelman's commentary on the inability to control
for unobserved variability between applicants, Neumark identifies a method
that can still generate accurate results. He then applies that method to
Bertrand and Mullainathan's (2004) study to not only confirm but also
strengthen their findings on the presence of racial discrimination towards
African American's in the labor market. He explains that the proposed method
can also be utilized in future audit studies by intentionally creating different
resumes rather than trying to make them all identical except for a single
variable.
Nguyen, Allen,
& Godkin
(2006)
Used a sample of undergraduate business majors who had some type of
experience in a previous position where they reviewed resumes. Seek to
examine the role that social capital plays in hiring decisions using applicants
personal connections with employers. Use resume content to indicate human
capital in the form of major, GPA, and work experience. Gave participants
resumes and hiring scenarios and had them rank, on a scale of one to five,
how likely they were to interview the candidate and how likely they were to
offer them a job.

References
About IPEDS. (n.d.). Retrieved on May 9, 2014 from http://nces.ed.gov/ipeds/about/
Arcidiacono, P. (2004). Ability sorting and the returns to college major. Journal of
Econometrics, 121(1), 343-375.
Arcidiacono, P., Hotz, V. J., & Kang, S. (2012). Modeling college major choices using elicited
measures of expectations and counterfactuals. Journal of Econometrics, 166(1), 3-16.
Arkes, J. (1999). What do educational credentials signal and why do employers value
credentials?. Economics of Education Review, 18(1), 133-141.
Baccalaureate and Beyond Longitudinal Study. (n.d.). Retrieved on May 9, 2014 from
http://nces.ed.gov/surveys/b%26b/
Behrman, J. R., Rosenzweig, M. R., & Taubman, P. (1996). College choice and wages:
Estimates using data on female twins. The Review of Economics and Statistics, 78(4),
672-85.
Bertrand, M., & Mullainathan, S. (2003). Are Emily and Greg more employable than Lakisha
and Jamal? A field experiment on labor market discrimination (No. w9873). National
Bureau of Economic Research.
Black, D. A., & Smith, J. A. (2004). How robust is the evidence on the effects of college quality?
Evidence from matching. Journal of Econometrics, 121(1), 99-124.
Brand, J. E., & Halaby, C. N. (2006). Regression and matching estimates of the effects of elite
college attendance on educational and career achievement. Social Science Research,
35(3), 749-770.
Brewer, D.J., Eide, E.R., Ehrenberg, R.G. (1999). Does it pay to attend an elite private college?
Cross-cohort evidence on the effects of college type on earnings. Journal of Human
Resources, 34(1), 104-123.
Card, D. (1999). The causal effect of education on earnings. Handbook of labor economics, 3,
1801-1863.
Cellini, S., & Chaudhary, L. (2011). The labor-market returns to a private two-year college
education (NBER Working Paper No. 18343).
Cellini, S. R., & Chaudhary, L. (2012). The labor market returns to a for-profit college
education (No. w18343). National Bureau of Economic Research.
Chung, A. (2008). Effects of for-profit college training on earnings. Munich Personal RePEc
Archive. Retrieved from: http://mpra.ub.uni-muenchen.de/18972/
Chung, A. S. (2012). Choice of for-profit college. Economics of Education Review, 31(6), 1084
1101. doi:10.1016/j.econedurev.2012.07.004
Cole, M. S., Rubin, R. S., Feild, H. S., & Giles, W. F. (2007). Recruiters perceptions and use of
applicant rsum information: Screening the recent graduate. Applied Psychology, 56(2),
319-343.
Dale, S. B., & Krueger, A. B. (2014). Estimating the Effects of College Characteristics over the
Career Using Administrative Earnings Data. Journal of Human Resources, 49(2), 323-
358.
Dale, S., & Krueger, A. B. (2011). Estimating the return to college selectivity over the career
using administrative earnings data (No. w17159). National Bureau of Economic
Research.
Dale, S. B., & Krueger, A. B. (2002). Estimating the payoff to attending a more selective
college: An application of selection on observables and unobservables.The Quarterly
Journal of Economics, 117(4), 1491-1527.
Deming, D., Goldin, C., & Katz, L. (2013). For-Profit Colleges. The Future of Children, 23(1),
137-163.
Denise, P. A. (2012). Does it pay to attend a for-profit college? Horizontal stratification in
higher education (Doctoral dissertation, University of Washington).
Derous, E., & Ryan, A. M. (2012). Documenting the Adverse Impact of Rsum Screening:
Degree of ethnic identification matters. International Journal of Selection and
Assessment, 20(4), 464-474.
Drydakis, N. (2009). Sexual orientation discrimination in the labour market. Labour Economics,
16(4), 364-372.
Fox, M. (1993). Is it a good investment to attend an elite private college?.Economics of
Education Review, 12(2), 137-151.
Ghayad, R. (2013). The Jobless Trap. Working Paper.
http://media.wix.com/ugd/576e9a_f6cf3b6661e44621ad26547112f66691. pdf.
Griffith, A. L., & Rothstein, D. S. (2009). Cant get there from here: The decision to apply to a
selective college. Economics of Education Review,28(5), 620-628.
Grogger, J., & Eide, E. (1995). Changes in college skills and the rise in the college wage
premium. Journal of Human Resources, 280-310.
Grubb, W. N. (1993). The long-run effects of proprietary schools on wages and earnings:
Implications for federal policy. Educational Evaluation and Policy Analysis, 15(1), 17-
33.
Heckman, J. J., & Siegelman, P. (1993). The Urban Institute audit studies: Their methods and
findings.
Heckman, J. J. (1998). Detecting discrimination. The Journal of Economic Perspectives, 101-
116.
Hiemstra, A. M., Derous, E., Serlie, A. W., & Born, M. P. (2013). Ethnicity effects in graduates'
resume content. Applied Psychology, 62(3), 427-453.
Hout, M. (2012). Social and economic returns to college education in the United States. Annual
Review of Sociology, 38, 379-400.
James, E., Alsalam, N., Conaty, J. C., & To, D. L. (1989). College quality and future earnings:
Where should you send your child to college?. The American Economic Review, 247-252.
Johnson, E., & Lahey, J. (2011). The resume characteristics determining job interviews for
middle-aged women seeking entry-level employment. Journal of Career Development,
38(4), 310-330.
Kane, J., & Spizman, L. M. (1994). Race, financial aid awards and college attendance. American
Journal of Economics and sociology, 53(1), 85-96.
Kroft, K., Lange, F., & Notowidigdo, M. J. (2013). Duration Dependence and Labor Market
Conditions: Evidence from a Field Experiment*. The Quarterly Journal of Economics,
128(3), 1123-1167.
Lahey, J. N., & Beasley, R. A. (2009). Computerizing audit studies. Journal of Economic
Behavior & Organization, 70(3), 508-514.
Lang, K., & Weinstein, R. (2012). Evaluating Student Outcomes at for-profit colleges (NBER
Working Paper No. 18201).
Light, A., & Strayer, W. (2000). Determinants of college completion: School quality or student
ability?. Journal of Human Resources, 299-332.
Long, M. C. (2008). College quality and early adult outcomes. Economics of Education Review,
27(5), 588-602.
Long, M. C. (2010). Changes in the returns to education and college quality.Economics of
Education Review, 29(3), 338-347.
Monks, J. (2000). The returns to individual and college characteristics: Evidence from the
National Longitudinal Survey of Youth. Economics of Education Review, 19(3), 279-289.
Nguyen, N. T., Allen, C. L., & Lynn Godkin, R. (2006). Recruiters' Assessment and Use of
Social Capital in Rsum Screening1. Journal of Applied Social Psychology, 36(8), 1813-
1832.
Neumark, David (2010). "Detecting Discrimination in Audit and Correspondence Studies".
NBER working paper series (0898-2937), w16448.
Rothstein, J. M. (2004). College performance predictions and the SAT. Journal of Econometrics,
121(1), 297-317.
Rumberger, R. W., & Thomas, S. L. (1993). The economic returns to college major, quality and
performance: A multilevel analysis of recent graduates.Economics of Education Review,
12(1), 1-19.
Smith, J. (2013). Ova and out: Using twins to estimate the educational returns to attending a
selective college. Economics of Education Review, 36, 166-180.
Thomas, S. L. (2000). Deferred costs and economic returns to college major, quality, and
performance. Research in Higher Education, 41(3), 281-313.
Thomas, S. L. (2003). Longer-term economic effects of college selectivity and control. Research
in Higher Education, 44(3), 263-299.
Thomas, S. L., & Zhang, L. (2005a). Post-baccalaureate wage growth within four years of
graduation: The effects of college quality and college major. Research in Higher
Education, 46(4), 437-459.
Thomas, S. L., & Zhang, L. (2005b). Investments in human capital: Sources of variation in the
return to college quality. In Higher education: Handbook of theory and research (pp.
241-306). Springer Netherlands.
Weiss, A. (1995). Human capital vs. signalling explanations of wages. The Journal of Economic
Perspectives, 133-154.
Zhang, L. (2005). Do measures of college quality matter? The effect of college quality on
graduates' earnings. The Review of Higher Education, 28(4), 571-596.

College Quality and Labor Market Outcomes Ratterree and Rosage 2014

Caricato da

Informazioni sul documento

Titolo originale

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

College Quality and Labor Market Outcomes Ratterree and Rosage 2014

Caricato da

Copyright:

Formati disponibili

Running head: COLLEGE QUALITY AND LABOR MARKET OUTCOMES

College Quality and Labor Market Outcomes: A Review of the Literature

Potrebbero piacerti anche