The Value of University

Wednesday, November 2nd, 2016

The Economist has ranked colleges based on the gap between how much money students subsequently earn and how much they might have made had they studied elsewhere:

We wanted to know how a wide range of factors would affect the median earnings in 2011 of a college’s former students. Most of the data were available directly from the scorecard: for the entering class of 2001, we used average SAT scores, sex ratio, race breakdown, college size, whether a university was public or private, and the mix of subjects students chose to study. There were 1,275 four-year, non-vocational colleges in the scorecard database with available figures in all of these categories. We complemented these inputs with information from other sources: whether a college is affiliated with the Catholic Church or a Protestant Christian denomination; the wealth of its state (using a weighted average of Maryland, Virginia and the District of Columbia for Washington) and prevailing wages in its city (with a flat value for colleges in rural areas); whether it has a ranked undergraduate business school (and is thus likely to attract business-minded students); the percentage of its students who receive federal Pell grants given to working-class students (a measure of family income); and whether it is a liberal-arts college. Finally, to avoid penalising universities that tend to attract students who are disinclined to pursue lucrative careers, we created a “Marx and Marley index”, based on colleges’ appearances during the past 15 years on the Princeton Review’s top-20 lists for political leftism and “reefer madness”. (For technically minded readers, all of these variables were statistically significant at the 1% level, and the overall r-squared was .8538, meaning that 85% of the variation in graduate salaries between colleges was explained by these factors. We also tested the model using 2009 earnings figures rather than 2011, and for the entering class of 2003 rather than 2001, and got virtually identical results.)

College Expected vs. Median Earnings

For example, Caltech’s forecast earnings increase by $27,114 as a result of its best-in-the-country incoming SAT scores, another $9,234 thanks to its students’ propensity to choose subjects like engineering, and a further $2,819 for its proximity to desirable employers in the Los Angeles area.


  1. Bomag says:

    Looks a little strange to have Harvard in the 99th percentile and Yale in the zeroth percentile.

    Just glancing through the list, there seems to be an advantage for schools in smaller towns next to wealthy urban areas.

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