How do better-ranked colleges help meet India’s skill shortages? Evidence using a regression discontinuity design

The returns to college quality have been largely examined using measures of labor market performance and academic achievement. While most papers find positive and significant effects of enrollment in elite colleges on wages and employment outcomes (e.g., Hoekstra, 2009; Saavedra, 2009; Sekhri, 2013), the evidence on the returns to enrollment in elite colleges on performance in college exit examinations remains mixed. While Sekhri and Rubinstein (2011), Dale and Krueger (2002), Black and Smith (2004) and Dale and Krueger (2011) find that better quality colleges have no value added in terms of college grades, others such as Long (2008), Saavedra (2009) and Li et al. (2012) find significant benefits.1 While these primarily focus on the cognitive aspects of human capital, another critical aspect, namely behavioral preferences and personality traits, often as important in determining labor market success and well being (Heckman et al., 2006; Lindqvist and Vestman, 2011; Borghans et. al, 2008; Bowles et al., 2001), have not yet been rigorously examined in this context.

The objective of this paper is to close the existing gap in the literature by examining the returns to exposure to high achieving peers on not just cognitive outcomes, but also on non-cognitive outcomes that include behavioral preferences and personality traits. In doing so, we use a regression discontinuity design to address the selection bias problem arising from the non-random nature of college enrollment (and peer exposure).