Does it Pay to Attend an Elite Private College? Cross Cohort Evidence on the Effects of College Quality on Earnings

While there is evidence of a substantial and rising labor market premium associated with college attendance, little is known about how this premium varies across institutions of different quality and across time. Previous research which has estimated the return to college quality has not taken into account that individuals likely select the type of college they attend based in part on the expected economic return and net costs. In this paper we explicitly model high school students' choice of college type (characterized by quality and control) based on individual and family characteristics (including ability and parental economic status), and an estimate of the net costs of attendance and expected labor market return. We estimate selectivity corrected outcome equations, using data from both the National Longitudinal Study of the High School Class of 1972 and High School and Beyond, which permit us to determine the effects of college quality on wages and earnings and how this effect varies across time. Even after controlling for selection effects there is strong evidence of significant economic return to attending an elite private institution, and some evidence that this premium has increased over time.