Do elite colleges matter? The impact on entrepreneurship decisions and career dynamics

Abstract

Elite college attendance significantly impacts students' entrepreneurship decisions and career dynamics. We find that an elite college degree is positively correlated with entrepreneurship (i.e., owning an incorporated business) but not with other self‐employment forms. Our overlapping generations model captures self‐selection in education and career choices based on heterogeneous ability and family wealth endowments over the life cycle. Our estimates show that (1) entrepreneurs and other self‐employed individuals require different types of human capital, and (2) elite colleges generate considerably more human capital gain than ordinary colleges, particularly for entrepreneurs. Distinguishing between elite and ordinary colleges improves our prediction of entrepreneurship decisions. Providing subsidies for elite colleges is more efficient than subsidizing their ordinary counterparts to encourage entrepreneurship, enhance intergenerational mobility, and enhance welfare. In contrast, although start‐up subsidy increases entrepreneurship, it does not improve their performance, and it is inferior to education subsidy in generating efficiency, equality, and intergenerational mobility.

Dissecting the compensation conundrum: a machine learning-based prognostication of key determinants in a complex labor market

“…The study also elucidates that the educational institution from which one graduate significantly contributes to compensation determination. Notably, premier institute (institute_Premier = 0.151) and non-premier institute (institute_Non_Premier = 0.065) are pivotal elements, particularly in entry-level IT positions, which is consistent with earlier studies (Herrmann and Nagel, 2023; Guo and Leung, 2021; Carroll et al. , 2019).…”

“…It is worth mentioning that high compensation is often associated with the prestige and caliber of distinguished institutions such as IIM/IIT/NIT, among others. Graduates from such premier institutions generally receive higher salaries and attain higher-level positions than their non-premier counterparts, as documented in existing literature (Herrmann and Nagel, 2023;Guo and Leung, 2021;Carroll et al, 2019). Moreover, it has been observed that entry-level and associate-level positions are compensated less than management and senior architect positions.…”

The Consumption Value of College

“…This paper takes a very different approach and represents the first attempt to quantify all consumption benefits of college that are directly substitutable with other goods, services, 1 Lazear (1977) provides an early analysis of the consumption vs. investment value of education. See, e.g., Keane andWolpin (1997, 2001), Cunha, Heckman, and Navarro (2005), Heckman, Lochner, and Todd (2006), Abbott et al (2019), and Guo and Leung (2020) for estimates of the importance of "psychic/utility/consumption" factors in explaining schooling attendance decisions. See, e.g., Arcidiacono (2004), Rask (2010), Zafar (2013), Gemici and Wiswall (2014), and Wiswall and Zafar (2015) for evidence on the importance of tastes in college major decisions.…”

Where Do Stem Graduates Stem from? The Intergenerational Transmission of Comparative Skill Advantages

“…See the overview in Mogstad (2017) and related empirical analysis in Houmark, Ronda, and Rosholm (2020). Also related is structural modeling of intergenerational effects (e.g., Lee and Seshadri (2018)) including analysis of multiple types of ability (e.g., Guo and Leung (2021)). mobility.…”