Texas QTE - 4-25-11.dvi

This paper uses administrative data on schooling and earnings from Texas to estimate quantile treatment effects of college quality on 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 are negative for nearly the entire distribution of earnings .and increase as we move across the earnings distribution. 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. Overall, these estimates provide the first direct evidence of the extent of heterogeneity in the effect of college quality on subsequent earnings in the literature, and our estimates point to the need to consider such heterogeneity in human capital models that incorporate college quality.