The next ISEG Research Seminar will take place on the 30th October and will include the participation of Monica Costa-Dias, who will present a paper entitled 'Higher Education Sorting and Social Mobility'.
The seminar will take place from 13.00 to 14.00 in Lecture Theatre 3 (Quelhas, 4th Floor).
Free admission.
Abstract:
Education is a main facilitator of social mobility, and higher education (HE) plays a major role in this. But while returns to HE are large, they also vary widely with the characteristics of programs, students and how they align. This paper investigates the role of HE sorting to explain heterogeneity in returns. Using rich administrative data for England, we document that students from disadvantaged backgrounds are less likely to enrol in HE than equally skilled higher SES peers, particularly in the most selective programs, and that low SES is associated with lower wages conditional on education and skills. To investigate the drivers of these gaps, we develop a life-cycle model of education, labour supply and earnings that allows for a rich characterization of heterogeneity in the skills that students have and that different educational programmes provide. A key feature of our model is that students and programs meet in a matching market in equilibrium, where sorting is determined. Exploiting geographical and cohort size variation, we can separate the preferences of students and programs and identify the returns to heterogeneous programs. Our model reproduces empirical patterns accurately. Using our model, we find that students from poorer backgrounds benefit more from investing in HE than better off students, but benefit less from enrolling in more selective programs. We also find that low SES students are less willing to pay for a match that promises higher future earnings. However, students' preferences cannot fully explain differences in HE sorting by SES. Rather, systematic differences in skills and admission rules that favor better off students also play a role. Counterfactual analysis of HE policies shows that demand side policies subsidizing tuition fees or incentivizing investments in STEM are insufficient to move the needle on social mobility; supply side policies could potentially be highly effective.