The Effect of College Quality on Earnings: Results from the N B E R-Thorndike Data

Using Gourman's academic rating of colleges, we attempt to determine the extent to which returns to higher education (for a sample of 5,000) are due to quality of institution, after standardizing for various sociodemographic, background, and mental ability characteristics. Earnings of individuals in the top fifth of the undergraduate school quality distribution and in the top two fifths of the graduate distribution are significantly and substantially higher than earnings of others. However, it is unclear to what extent the quality variable is reflecting educational quality as opposed to individual scholastic abilities (by measuring selection of entrance to college).