Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2010:1: College Achievement and Earnings

Jonathan Gemus ()
Additional contact information
Jonathan Gemus: Department of Economics, Postal: Department of Economics, Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: I study the size and sources of the monetary return to college achievement as measured by cumulative Grade Point Average (GPA). I first present evidence that the return to achievement is large and statistically significant. I find, however, that this masks variation in the return across different groups of people. In particular, there is no relationship between GPA and earnings for graduate degree holders but a large and positive relationship for people without a graduate degree. To reconcile these results, I develop a model where students of differing and initially uncertain ability levels choose effort level in college and whether to earn a graduate degree. College achievement and graduate attainment are allowed to increase human capital and be used by employers to screen workers. In the separating equilibrium studied, workers who earn a graduate degree can effectively signal high productivity to employers. As a result, employers use undergraduate GPA-a noisy signal of productivity-to screen only the workers who do not hold a graduate degree. Viewing the empirical results through the lens of this equilibrium, the zero GPA-earnings relationship for graduate degree holders and the positive and large relationship for people without a graduate degree suggests that most of the reutrn to achievement net of graduate educational attainment is driven by sorting.

Keywords: Returns to Education; Academic Achievement; Signaling; Human Capital

JEL-codes: D82; I20; I21; J24

43 pages, January 27, 2010

Full text files

FULLTEXT01.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Lovisa Isaksson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2019-01-15 07:35:23.