My family spent a lot of money to send me through Yale. There are many reasons I'm happy they did. Friends and experiences I probably wouldn't have received elsewhere. A capella singing. Road trips. And the ability to command a higher earnings stream. After all, just look at all the wealthy people with degrees from Yale. I used to tell my father what a smart investment we were making.
Turns out I was wrong (sorry Dad). Stacy Berg Dale and Alan Krueger in an NBER paper "Estimating The Payoff To Attending A More Selective College" http://www.nber.org/digest/dec99/w7322.html
find that school selectivity, measured by the average SAT score of the students at a school, doesn't pay off in a higher income over time. "Students who attended more selective colleges do not earn more than other students who were accepted and rejected by comparable schools but attended less selective colleges," the researchers write. They also find that the average SAT score of the schools students applied to but did not attend is a much stronger predictor of students' subsequent income than the average SAT score of the school students actually attended.
I applaud their inventive methodology, but am tentatively skeptical about the conclusion. After all, Alan and Stacy are from inferior institutions -- Princeton and Mellon.
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