Econometrics of University Selection Prestige Location Ivy Term Paper

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Excerpt from Term Paper :

Econometrics of University Selection



Ivy League

Type of Curriculum

Attending college, and the selection of colleges, is one of the most important decisions individuals can make in their youth. Future college students base their decision making criteria on a wide range of information. Some consider whether or not the school is a party school, others consider the history and the level of prestige that the school has obtained, and others may select a school based on the cost or the proximity to their homes. However, one metric that will eventually affect all students is the level of income they will obtain during their career. In most cases graduates will seek employment after graduation and be selected and compensated based upon factors including the school they attended, their major, and their performance while attending the school. This research will attempt to determine some of the factors that have the most influence upon mid-career salaries in order to provide insight into the economic value that regulate, or at least should be considered in such decisions.

Literature Review

College costs have risen by considerable amounts over the last couple of decades; especially within the last decade. This in turn has caused many analyses to reevaluate the costs and benefits associated with the higher educational process. One analysis found that between the periods of 1989 to 1999 the amount of student debt on average nearly doubled (Boushey, 2003). Since the period of 1999 to 2011 the level of student debt nearly doubled again (Pope, 2011). Furthermore, the unemployment rate for new college graduates was estimated to be over nine percent over the same year. Given the increase and cost coupled with the decreased likelihood of finding a job, the benefits of such an investment has been skewed to make the financial implications for the current generation are more severe than any previous generation on average.

Given the rising costs of higher education, it behooves any individual who is considering the decision to do so wisely. It is necessary to determine what the expected benefit of devoting the massive amount of time and resources that are required to pursue a college degree. In many cases, the benefits for degrees in non-technical fields may not justify the expenditure in the tuition on a financial basis. China, who is experiencing a similar trend, has actually considering cancelling majors that do not lead to job creation (Associated Press, 2011). If any major produces graduates in a school who suffer from an unemployment rate of over sixty percent for two consecutive years then this major could be cut by the Chinese government.

One driver in the rising cost of higher education is the total expenditures per student have been increasing over time (Vedder, 2005). The costs of equipping classrooms with the latest technologies have increased dramatically as these technologies have matured. The demand for higher educational degrees is another drive that has also resulted in price increases; especially in non-traditional classroom settings (Allen & Seaman, 2010). There are more students from all kinds of different demographic categories that have taken advantage of new mediums of learning to further their educations. Many of these individuals would have never had the opportunity for such educational opportunities previously and the trend has undoubtedly been propped up by new developments in technology.


The dependent variable of this study was the median career salary of graduates from a mix of universities a crossed the country. Schools were selected based on data provided by the Wall Street Journal which compared median salaries based on a range of school categorized by variables such as prestige, location, Ivy League, and the type of curriculum offered.


Prestige was gauged by the rankings that the school was awarded by the median salary data. This data provided the average mid-salary that was reported back to the schools by former graduates in random polling exercises. This could potentially represent a limitation to the study since self-reporting income surveys could not be truly represented of the entire graduate population. However, given the number of students that self-reported it is likely that the numbers are fairly accurate.


Location is an important consideration because generally the East and West coasts offer more in regards to access to resources and employment. The coasts have more condensed business opportunities that are found in other parts of the nation. Therefore it reasonable to suspect that the proximity graduates have to employment opportunities might impact the likelihood that they will be able to achieve suitable employment. Though this may only represent a slight advantage since colleges in major metropolitan areas such as Chicago and Kansas City also possess a number of industrial centers. However, these locations are still quite different compared to the coastal areas and are far sparser in terms of population density.

Ivy League

Most colleges that are included in the category of Ivy League schools were included in this study. These schools are often also considered as some of the most prestigious schools in the nation for various studies. However, there prestige rating has subsided in many academic disciplines as other schools have specialized in technical or liberal arts niches.

Type of Curriculum

Schools were also rated on the types of curriculums that they specialize in or that they are known for. For examples, the categories include such items as engineering, party, liberal arts, state, and Ivy League. This categorization allows for comparison of schools by their main category.

Data Example



What was found is that location and type of school resulted in weak or even negative correlations with the mid-career salaries. Therefore it wouldn't be prudent for a student to focus on the variable exclusively. It follows that there are good schools in all categories of all types of academic concentrations as well as in various locations a crossed the country. Although the Ivy League category scored relatively high in comparison, other schools, especially in the engineering majors also commanded some of the top salaries.

Of the entire set of variables considered, the starting salary served as the best predictor of mid-career salary. On one hand this could be easily dismissed because it is rather intuitive. However, on the other hand it serves to provide a reliable and easy identifiable way for students to quickly gauge their mid-career salary potential by identifying the average starting salary in their discipline. With that information alone students are likely to be able to rate various schools against each other and be able to easily predict which school will have the best mid-career salaries as well.

It is also interesting to note that though the party schools have lower starting salaries compared to other categories of schools, that the percentage growth into the mid-career salary ranges was one of the highest; only Ivy League schools increased their salaries more between the two periods. Although engineering schools have a rather high starting salary comparatively, this type of major doesn't increase their salaries as fast as other types of programs. One possible explanation would that these roles are more technical in nature with less room for advancement. Another explanation might be that since the field is advancing rapidly that more value is placed on the younger graduates that are fresh out of school.


Although most students out of high school will not have the capabilities to perform an in-depth statistical analysis of their college options, a trend that was identified can serve as a condensed analysis. It is recommended that students compare the starting salaries of the schools that they are interested in and weight these starting salaries with the cost of attendance. Comparing the total cost of the degree with the average starting salary should serve as a good basis for a cost benefit analysis that is believed to be a…

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