Public versus private college education in developing countries: Economic and social implications in India

Tertiary education has fuelled the economic growth in India in recent times. This has in turn generated excess demand for highly a educated and skilled workforce. Against this backdrop, it is vital to understand whether public institutions should be expanded or private institutions could provide good quality higher education so that public subsidies could be targeted towards merit-cum-need based scholarships. In India, public colleges are considered very prestigious and the average scores of the graduates in college exit tests and earnings in labour markets are higher than the private counterparts suggesting that public institutions provide higher quality education. But only the very best students are admitted to public colleges. This could imply that the difference is purely due to positive sorting. It is essential to understand whether this difference is indeed due to high value added as this would inform which type of policies to favour. This policy brief and the accompanying working paper provide evidence that graduates of elite public institutions in India have an earnings advantage in the labour-market even though attending these colleges has no discernible effect on learning outcomes.