Search

Value-added data have become an increasingly common evaluation tool for schools and teachers. Many school districts have begun to adopt these methods and have released results publicly. In this paper, we use the unique public release of value-added data in Los Angeles to identify how this measure of school quality is capitalized into housing prices. Via difference-in-differences, we find no evidence of a response to either school or teacher value-added rank, even though school-zone boundary fixed-effects estimates indicate that test score levels are capitalized into home prices. Given ample evidence that this information was new to residents, widely dispersed, and easily available, our results suggest that people did not significantly value it on the margin. This has implications for the effectiveness of providing value-added information as a tool to help parents choose schools. Supplemental tables and a figure are appended.

Early research on the returns to higher education treated the postsecondary system as a monolith. In reality, postsecondary education in the United States and around the world is highly differentiated, with a variety of options that differ by credential (associates degree, bachelor's degree, diploma, certificate, graduate degree), the control of the institution (public, private not-for-profit, private for-profit), the quality/resources of the institution, field of study, and exposure to remedial education. In this Chapter, we review the literature on the returns to these different types of higher education investments, which has received increasing attention in recent decades. We first provide an overview of the structure of higher education in the U.S. and around the world, followed by a model that helps clarify and articulate the assumptions employed by different estimators used in the literature. We then discuss the research on the return to institution type, focusing on the return to two-year, four-year, and for-profit institutions as well as the return to college quality within and across these institution types. We also present the research on the return to different educational programs, including vocational credentials, remedial education, field of study, and graduate school. The wide variation in the returns to different postsecondary investments that we document leads to the question of how students from different backgrounds sort into these different institutions and programs. We discuss the emerging research showing that lower-SES students, especially in the U.S., are more likely to sort into colleges and programs with lower returns as well as results from recent U.S.-based interventions and policies designed to support success among students from disadvantaged backgrounds. The Chapter concludes with some broad directions for future research.

The higher education system in the United States is characterized by a large degree of quality heterogeneity, and there is a growing literature suggesting students attending higher quality universities have better educational and labor market outcomes. In this paper, we use NLSY97 data combined with the difference in the timing and strength of the housing boom across cities to examine how short-run home price growth affects the quality of postsecondary schools chosen by students. Our findings indicate a $10,000 increase in a family's housing wealth in the four years prior to a student becoming of college-age increases the likelihood she attends a flagship public university relative to a non-flagship public university by 2.0 percent and decreases the relative probability of attending a community college by 1.6 percent. These effects are driven by relatively lower and middle-income families. We show that these changes are due to the effect of housing wealth on where students apply, not on whether they are admitted. We also find that short-run increases in home prices lead to increases in direct quality measures of the institutions students attend. Finally, for the lower-income sample, we find home price increases reduce student labor supply and that each $10,000 increase in home prices is associated with a 1.8% increase in the likelihood of completing college.

This paper uses administrative data on schooling and earnings from Texas to estimate the effect of college quality on the distribution of earnings. We proxy college quality using the college sector from which students graduate and focus on identifying how graduating from UT-Austin, Texas A\&M or a community college affects the distribution of earnings relative to graduating from a non-flagship university in Texas. Our methodological approach uses the rich set of observable student academic ability and background characteristics in the data to adjust the earnings distributions across college sectors for the fact that college sector quality is correlated with factors that also affect earnings. Although our mean earnings estimates are similar to previous work in this area, we find evidence of substantial heterogeneity in the returns to college quality. At UT-Austin, the returns increase across the earnings distribution, while at Texas A\&M they tend to decline with one's place in the distribution. For community college graduates, the returns relative to non-flagship four-year graduates are negative across most of the distribution of earnings, but they approach zero and become positive for higher earners. Our data also allow us to estimate effects separately by race and ethnicity, and we find that historically under-represented minorities experience the highest returns in the upper tails of the earnings distribution, particularly among UT-Austin and community college graduates. While we focus on graduates, we also show our estimates are robust to examining college attendees as well as to many other changes in the sample and to the estimation strategy. Overall, these estimates provide the first direct evidence of the extent of heterogeneity in the effect of college quality on subsequent earnings, and our estimates point to the need to consider such heterogeneity in human capital models that incorporate college quality.