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Worker Signals among New College Graduates: The Role of Selectivity and GPA

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Abstract
Recent studies have found a large earnings premium to attending a more selective college, but the mechanisms underlying this premium have received little attention and remain unclear. In order to shed light on this question, I develop a multidimensional signaling model relying on college grades and selectivity that rationalizes students’ choices of effort and firms’ wage-setting behavior. The model is then used to produce predictions of how the interaction of the signals should be related to wages, namely that the return on college GPA should fall the more selective the institution attended. Using five data sets that span the early 1960s through the late 2000s, I show that the data support the predictions of the signaling model, with support growing stronger over time as college sorting by ability has increased. The findings imply that return to college selectivity depends on GPA, something previously not recognized in the literature, and they can rationalize why employers learn more quickly about college graduates’ productivity than less educated workers’.

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  • Brad J. Hershbein, 2013. "Worker Signals among New College Graduates: The Role of Selectivity and GPA," Upjohn Working Papers 13-190, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:weupjo:13-190
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    Cited by:

    1. Suhonen, Tuomo, 2013. "Are there returns from university location in a state-funded university system?," Regional Science and Urban Economics, Elsevier, vol. 43(3), pages 465-478.
    2. Stacy B. Dale & Alan B. Krueger, 2014. "Estimating the Effects of College Characteristics over the Career Using Administrative Earnings Data," Journal of Human Resources, University of Wisconsin Press, vol. 49(2), pages 323-358.
    3. Michela Vecchi & Maja Savic & Marina Romiti, 2021. "Skill mismatch among UK graduates," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2021-11, Economic Statistics Centre of Excellence (ESCoE).
    4. Eleanor Wiske Dillon & Jeffrey Andrew Smith, 2020. "The Consequences of Academic Match between Students and Colleges," Journal of Human Resources, University of Wisconsin Press, vol. 55(3), pages 767-808.
    5. Douglas Coate, 2017. "Varsity Sports Participation, College Selectivity, and First Job in Investment Banking or Management Consulting in the US," Working Papers Rutgers University, Newark 2017-001, Department of Economics, Rutgers University, Newark.
    6. Lynne Pepall & Dan Richard, 2014. "Competition, Selectivity and Innovation in the Higher Educational Market," Discussion Papers Series, Department of Economics, Tufts University 0782, Department of Economics, Tufts University.
    7. Michela Vecchi & Catherine Robinson & Maja Savic & Marina Romiti, 2023. "Vertical and Horizontal Mismatch in the UK: Are Graduates' Skills a Good Fit for Their Jobs?," National Institute of Economic and Social Research (NIESR) Discussion Papers 548, National Institute of Economic and Social Research.
    8. repec:hal:journl:hal-03383112 is not listed on IDEAS
    9. repec:hal:spmain:info:hdl:2441/1ta425q4ev9o6a76uep4hjlunc is not listed on IDEAS
    10. Boring, Anne & Brown, Jennifer, 2024. "Gender and choices in higher education," Economics of Education Review, Elsevier, vol. 99(C).
    11. Gilbert E. Metcalf & James Stock, 2015. "The Role of Integrated Assessment Models in Climate Policy: A User's Guide and Assessment," Discussion Papers Series, Department of Economics, Tufts University 0811, Department of Economics, Tufts University.
    12. Douglas Coate, 2018. "Varsity Sports Participation, College Selectivity, and First Job in Investment Banking or Management Consulting in the US," Working Papers Rutgers University, Newark 2018-002, Department of Economics, Rutgers University, Newark.
    13. Bacalhau, Priscilla & Mattos, Enlinson & Ponczek, Vladimir Pinheiro, 2019. "College quality signaling and individual performance: effects on labor market outcomes after graduation," Textos para discussão 502, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    14. repec:spo:wpmain:info:hdl:2441/1ta425q4ev9o6a76uep4hjlunc is not listed on IDEAS
    15. Arnaud Chevalier, 2014. "Does Higher Education Quality Matter in the UK?," Research in Labor Economics, in: Factors Affecting Worker Well-being: The Impact of Change in the Labor Market, volume 40, pages 257-292, Emerald Group Publishing Limited.
    16. Stefano STAFFOLANI & Maria Cristina RECCHIONI, 2016. "Increasing Graduation and Calling for More Autonomy in Higher Education: Is It a Good Thing? A Theoretical Model," Working Papers 419, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    17. Weinstein, Russell, 2017. "University Selectivity, Initial Job Quality, and Longer-Run Salary," IZA Discussion Papers 10911, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    college graduates; signaling; school quality; grade point average;
    All these keywords.

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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