Economics of Education Review 19 2000 47–61 www.elsevier.comlocateeconedurev
Does the return to university quality differ for transfer students and direct attendees?
Michael J. Hilmer
Department of Economics, University of Louisville, Louisville, KY 40292, USA Received 16 April 1997; accepted 12 November 1998
Abstract
This paper examines the return to university quality for a sample of students drawn from the High School and Beyond survey. This analysis extends previous work by: 1 controlling for the fact that students are free to transfer
between different quality institutions while pursuing their degrees and 2 allowing the return to quality to vary across different ranges of institutional quality. The results suggest that the return to university quality differs dramatically
across both educational paths and university quality ranges. A large, positive return to graduation quality is observed for university and community college transfers graduating from the highest quality universities, while an insignificant
return is observed for all other students. Additionally, the length of time spent at initial institutions has a significant negative effect on university transfers. These findings suggest that it is important to consider a student’s educational
path when examining the return to higher education. [JEL J31]
1999 Elsevier Science Ltd. All rights reserved.
Keywords: University quality; Transfer; Return to college
1. Introduction
The quality of university from which a student gradu- ates has a positive effect on his or her future earnings.
Previous research has estimated that the return to univer- sity quality is between three and seven percent for each
100 point increase in the average SAT score of entering freshmen
at the
student’s graduation
university Rumberger Thomas 1993; James, Alsalam, Con-
aty, To 1989; Mueller 1988; Wise 1975; Sol- mon Wachtel 1975; Wales 1973. A potential
shortcoming of previous studies is that they only con- sider the quality of university from which a student
graduates. Tinto 1987 finds that among college gradu- ates in the National Longitudinal Survey, sixty-nine per-
cent attend their graduation colleges exclusively, twenty- two percent transfer to their graduation college from a
different four-year college, and nine percent transfer to
Tel.: 11-502-852-7836; fax: 11-502-852-7672; e-mail: mjhilm01cbpa.louisville.edu
0272-775799 - see front matter
1999 Elsevier Science Ltd. All rights reserved. PII: S 0 2 7 2 - 7 7 5 7 9 9 0 0 0 2 1 - 7
their graduation college from a two-year college. If uni- versity quality matters, then presumably the quality of
education received at each step in a student’s post-sec- ondary career should affect his or her future earnings.
By focusing only on graduation quality, previous work has failed to account for the effect that prior quality may
have on the future earnings of college graduates who transfer between different quality institutions. Given that
as many as one-third of all college graduates attend more than one institution during their post-secondary career,
the initial quality effect is a potentially important effect that should be considered when examining the return to
university quality.
The current study examines the return to university quality for male college graduates in the High School
and Beyond survey National Center for Education Stat- istics 1987. This study improves on previous research
in two important ways. First, unlike previous studies this work considers the fact that students can transfer
between different quality institutions while pursuing their degrees. Second, instead of entering quality only as
a continuous variable, the analysis enters quality as a
48 M.J. Hilmer Economics of Education Review 19 2000 47–61
series of dummy variables thereby allowing the return to quality to vary across different ranges of institutional
quality. The results indicate that: 1 there are important differences between transfer students and direct atten-
dees and 2 the return to quality does differ according to the range of institutional quality. The results suggest
that the oft-cited significant positive return to university quality exists exclusively for university and community
college transfer students who graduate from the highest quality universities 1,200 1 SAT points. Such students
are estimated to earn nearly twice as much upon gradu- ation as similar students who graduate from the lowest
quality universities , 800 SAT points. The quality of university initially attended also affects a university
transfer’s future earnings. Controlling for the quality of university initially attended by university transfers sug-
gests that there is a significant negative return associated with transferring down from the highest quality univer-
sities to lower quality universities. Additionally, the length of time that university transfer students spend at
their initial institutions is also found to have a significant negative effect on post-graduation earnings. Such find-
ings may be suggestive of potential deleterious effects of mismatching between students and initial institutions
rather than institutional effects on earnings. Nonetheless, they demonstrate that transferring between different
quality schools does affect a student’s future earnings and should therefore be considered in studies of the
economic return to a college degree.
2. Description of the data
