How Ivy League Schools Tilt Your Odds in the Lottery of Life

From a Wall Street Journal story by Josh Zumbrun headlined “How Ivy League Schools Tilt Your Odds in the Lottery of Life”:

Economists have long scoffed at parents’ obsession with getting their kids into an Ivy League college, thanks to research years ago showing it made no difference to a student’s future income.

But it turns out that research might have missed something important. A new look at similar data suggests that for a select minority, Ivy League admission does yield a career jackpot.

These findings tend to reinforce the suspicion that the nation’s top universities aren’t just a gateway to a good job but to the nation’s ruling elite. That is especially relevant in the wake of a Supreme Court ruling prohibiting the use of race as a factor in college admissions.

Until now, the received wisdom among economists was based on a pair of papers published in 2002 and 2014 showing that students who were accepted to elite schools, but didn’t actually attend them, ended up having the same average incomes as students who attended.

Authors Stacy Berg Dale, now a principal researcher at data-science company Mathematica, and the late Alan Krueger of Princeton University based their findings on admissions data from a mix of 34 private and public universities, liberal-arts colleges and historically black institutions for the year 1976. They sought to track down nearly every student from this cohort 20 years later. A follow-up study followed students from the 1989 school year.

Dale, then a researcher for the Mellon Foundation, realized the data could settle a debate lingering since the 1960s. Did graduates of top universities earn more because of something the college did, or because elite schools simply attracted people with the characteristics—diligence, smarts, initiative—to earn more?

About 35% of the students in their data didn’t attend the most selective school that accepted them. That enabled Dale and Krueger to compare two students admitted to Princeton, one of whom accepted and one of whom went to a less selective school.

“People either loved or hated our paper, it was very extreme,” said Dale. It raised an uncomfortable question: “Why would everyone be paying to go to these elite schools if they didn’t really have any added value?”

Yet this research never felt totally satisfying. It suggests something irrational about the obsession with Ivy League admission, and economists are reluctant to assume people are systematically irrational.

This week, Raj Chetty and David Deming of Harvard University, and John Friedman of Brown University published a detailed dive into the inner workings of admissions offices with a twist on the Dale-Krueger story.

Their approach was similar: using internal university records with information such as GPAs, test scores and nonacademic credentials for nearly 500,000 applicants to 12 top universities including the Ivy League, and 1.9 million applicants to flagship public colleges, Chetty and his co-authors compared otherwise similar students, one of whom accepted the offer of a top-12 school, one of whom didn’t. Like Dale and Krueger, they found the top students had comparable earnings.

The twist emerged when they dove deeper into the people with the highest incomes.

Dale and Krueger had classified everyone who earned more than $200,000 into the same category, making no distinction between an affluent doctor earning $250,000 and Jeff Bezos. The term for this is “top-coding.”

Chetty and his authors use a slightly different approach. They classify everyone’s income into percentiles—80th, 81st, etc. This still tends to dilute the Bezos effect because he is grouped in with the entire top 1%, most of whom are much less wealthy. But it captures variation within the top 20% better than the Dale-Krueger study, which treated everyone above $200,000 as earning $200,000.

The result: Chetty and his co-authors find top students who didn’t attend an Ivy-like school had average incomes in the 79th percentile; those who did attend earned only marginally more: they were in the 81st.

Where an Ivy-like school really made an impact was in the odds of an exceptional, Bezos-like outcome. Among top students, 19% who attend the top schools make it to the richest 1% of the income distribution, versus 12% who didn’t attend. Attendance at an Ivy-like institution had an even bigger impact on attendance in graduate school or working at a prestigious firm.

(Chetty also says that 12% of Fortune 500 CEOs or 25% of U.S. senators went to the top schools. Fewer than 100 people, but a remarkable concentration of extreme success.)

“Do you become a highly paid professional at a very good company? For those kind of outcomes, the school you go to matters a little but not a ton,” said Chetty. “Where it matters enormously is reaching the upper tail, the path to becoming a CEO, leading scientist at a top graduate school, political leader…these upper-tail outcomes that are rare in percentage terms but incredibly important in society.”

Chetty’s co-author Deming compares those upper-tail outcomes to winning the lottery: Elite schools have lots of lottery tickets lying on the ground, whereas most other colleges only have a few.

For most people, the lottery ticket will be worth nothing. For a few, it is a jackpot: a classmate who helps implement a billion-dollar idea. Connections that help you run for Congress. A mentor who gets you into a top Ph.D. program.

This suggests the focus on selective college admissions should be less about how much one earns, and more on who wins the lottery of professional success.

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