Reputation and School Competition
W. Bentley MacLeod, Miguel Urquiola
American Economic Review · 2015 · Volume 105 · Issue 11
Abstract
Stratification is a distinctive feature of competitive education markets that can be explained by a preference for good peers. Learning externalities can lead students to care about the ability of their peers, resulting in across-school sorting by ability. This paper shows that a preference for good peers, and therefore stratification, can also emerge endogenously from reputational concerns that arise when graduates use their college of origin to signal their ability. Reputational concerns can also explain puzzling observed trends including the increase in student investment into admissions exam preparation, and the decline in study time at college. (JEL I21, I23, I26, J24)
Keywords
Analysis of Education, Higher Education, Research Institutions, Returns to Education, Human Capital, Skills, Occupational Choice, Labor Productivity
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