Description of the data

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

This study makes use of a unique data set that is con- structed by combining individual-specific information on students drawn from a US Department of Education sur- vey with institution-specific information on the colleges attended by those students. Students in the third follow- up of the High School and Beyond HSB survey were first questioned in 1980 as either sophomores or seniors in high school. Follow-up interviews were conducted in 1982, 1984, and 1986. Roughly 14,000 sophomores and 10,000 seniors participated in the base-year survey and all three follow-up interviews. The base year question- naire of both surveys provides extensive individual and family background information, while subsequent inter- views provide detailed information about the respondents post-secondary education, employment, and earnings. One potential shortcoming of the HSB survey is the relatively small number of students who graduated from college by the third follow-up. Of the roughly 24,000 students who participated in all three follow-ups, less than 3,000 had graduated by the time of the 1986 survey. Part of this can be explained by the fact that students in the sophomore cohort were being questioned during the spring of their fourth year out of high school and thus most who would one day graduate had not yet graduated. Nonetheless, the sample to be analyzed contains fewer observations than might be desired. Hence, a word on why the HSB was chosen for this study is merited. Other data sets, such as the NLSY, the Census, or the Survey of Recent Graduates would provide much larger samples of college graduates. However, those data only include information on the college from which a student gradu- ated. The focus of this study is students who transfer between different universities. To identify such students it is necessary to observe all colleges that a student attended. Consequently, those data sets that only observe graduation colleges are inappropriate for this study. The HSB does provide the detailed level of college attend- ance information necessary to construct a student’s edu- cational path. Therefore, it is most appropriate for this analysis despite the potential for relatively small sam- ple sizes. The sample used here consists of men who partici- pated in the base-year survey and each follow-up inter- view. 1 The sample is restricted to college graduates who in 1986 had an hourly wage between 1 and 100. Because being able to identify each student’s educational path is central to this analysis, students who failed to provide adequate data on each of the institutions they attended were excluded. Of the 1,275 men who had received a Bachelors degree by 1986, these restrictions left 794 men in the sample. 2 The Higher Education General Information Survey HEGIS is an annual survey of post-secondary four-year institutions that provides extensive information on insti- tutional characteristics that affect a student’s educational experience. The information used here comes from the 1980 survey. This institution-specific information is sup- plemented by data representing institutional quality taken 1 In order to control for a student’s educational path, one has to observe a student’s college attendance decision at each stage of his or her post-secondary career. As a result, it is necessary to limit the sample to only those students who participated in each part of the survey. The studies by James et al. 1978 and Eide and Grogger 1995 did not control for a student’s educational path and thus only required the student to have par- ticipated in the base year survey and the follow-up survey from which wage data was taken. The more restrictive participation requirement of the current study explains why the sample used here is smaller than the samples used in those previous studies. 2 The number of college graduates excluded due to each restriction is as follows. 121 graduates did not respond to the base year survey and all three follow-up surveys. 170 graduates did not provide adequate postsecondary attendance information. 137 graduates did not provide valid wage information. 53 graduates attended colleges for which a quality measure could not be assigned. Mean values for individual characteristics do not differ significantly for the sample used and the original sam- ple of college graduates. 49 M.J. Hilmer Economics of Education Review 19 2000 47–61 from Barron’s Profiles of American Colleges, 1982 and 1984 Barron’s College Division 1984. The dependent variable in this analysis is the logar- ithm of 1986 hourly wages. 3 Values that affect future wages include family background and individual charac- teristics, academic performance in college, labor market experience, and a set of institutional characteristics. Fam- ily background is measured by FAMILY INCOME. 4 Mutually exclusive race categories are BLACK, HIS- PANIC, and OTHER RACE. 5 Innate ability is measured by performance on standardized tests administered dur- ing the student’s senior year in high school, MATH TEST and READ TEST, while academic motivation is measured by his self-reported high school grade point average, HS GRADES. Academic performance in college is measured by the student’s self-reported college grade point average, COLLEGE GRADES, and his chosen field of study. Fields of study are collapsed into one of six categories: BUSINESS, ENGINEERING, SCIENCE, SOCIAL SCIENCE, EDUC. LETTERS, and OTHER MAJOR. 6 A student’s labor market experience is measured by several different values. WORK EXPERIENCE is an annualized measure representing the student’s employ- ment since graduating from high school. Remaining measures are dummy variables representing whether the student had received a postgraduate degree, was cur- rently pursuing a postgraduate degree, was a full-time employee, and was employed in his major occupation. Institutional characteristics that may affect a student’s future earnings are experienced by all students who attend the institution. The set of characteristics controlled for here are chosen to represent the institution’s research mission and the institution’s quality. The institution’s research mission is represented by two dummy variables, RESEARCH I and DOCTORAL, that are unity if the institution is classified as a Research I type university 3 Hourly wage is defined as average weekly wage divided by average hours worked per week. Earnings data were reported differently in the two surveys, and thus the steps required to calculate hourly wage are slightly different. For a detailed explanation of the hourly wage calculation, as well as the calcu- lation of other variables used in this analysis, see Appendix 1 of Eide and Grogger 1995. 4 In the HSB survey, family income is a categorical variable. In 1980 the income categories are: 1 less that 7,000; 2 7,000 to 11,999; 3 12,000 to 15,999; 4 16,000 to 19,999; 5 20,000 to 24,999; 6 25,000 to 37,999; 7 38,000 or more. 5 Students in the Other Race category are defined as either American Indian or Alaska Native, or Asian or Pacific Islander. 6 These college major categories are the same as those used in Eide and Grogger 1995. The broad groupings were required to avoid the small sample sizes that were associated with more detailed groupings. Carneghie classification or if the university is a Ph.D. granting institution. University quality is measured by the mean SAT score for entering freshman as published in Barron’s Profiles of American Colleges. 7 These meas- ures, GRADUATION QUALITY and INITIAL QUAL- ITY, represent the quality of university from which the student graduated and the quality of the last university attended before transferring, respectively. 8 College graduates can be divided into three groups depending on the educational path they follow while pur- suing their degree. A student can attend his graduation college exclusively, DIRECT ATTENDEE, attend a four-year college before transferring to his graduation college, UNIVERSITY TRANSFER, or attend a two- year college before transferring to his graduation college, COMMUNITY COLLEGE TRANSFER. 9 The group of university transfers can further be subdivided depending on whether the student transferred from a lower to a higher quality university, UNIVERSITY TRANSFER UP, or transferred from a higher to a lower quality uni- versity, UNIVERSITY TRANSFER DOWN. Finally, the fraction of total education received at initial institutions, PRE-TRANSFER, is calculated as the total number of years spent at previous institutions divided by the total number of years required to graduate. Hence, this value is defined to be zero for direct attendees. Table 1 displays mean university quality choices, number of years required to graduate, percent of edu- cation spent at initial institutions, work experience, and 1986 hourly wages for students in the sample. Of the 794 college graduates represented, roughly seventy percent attended their graduation universities directly, nineteen percent transferred from a different university, and eleven percent transferred from a community college. These findings are similar in magnitude to those in Tinto 1987. Note, however, that the percentage of college graduates who start in a community college is nearly twenty percent higher for this sample. This might be expected given evidence about the increase during the 7 Respondents in the survey graduated in the mid-1980s. Hence, the university quality measures are drawn from the 1984 edition of the text. SAT scores are imputed for students who report only ACT scores. 8 Transfer students can attend more than one different insti- tution before transferring to their ultimate university. Students in this sample attend an average of 1.86 different institutions before transferring to their graduation university. To account for this, different formulations of the initial quality measure were tried i.e. average previous quality, time-weighted average previous quality, etc.. The results did not differ significantly for any of the other specifications. 9 Five students attended both a community college and a dif- ferent university before transferring to their graduation college. For purposes of this study, these students are classified as uni- versity transfers. 50 M.J. Hilmer Economics of Education Review 19 2000 47–61 Table 1 University quality choices and entry-level wages Direct Attendees All University University Transfer University Transfer Community College Transfers Up Down Transfer Graduation Quality 997.20 970.13 1019.56 922.44 970.12 125.97 113.55 102.89 102.92 114.12 Initial Quality – 974.33 920.43 1026.34 – – 119.92 98.23 116.41 – Years To Degree 4.117 4.258 4.290 4.230 4.439 0.64 0.79 0.67 0.89 0.74 Pre-Transfer 0.000 0.405 0.433 0.376 0.423 0.00 0.26 0.27 0.25 0.19 Work Experience 3.186 3.329 3.339 3.319 3.726 1.89 1.84 1.89 1.80 1.63 Hourly Wage 8.043 7.988 9.360 6.664 7.385 5.25 5.43 7.03 2.67 4.00 Number of 551 155 77 78 88 Observations Standard deviations are in parentheses. Observations with missing values are not included in the calculation of those variables. Data are weighted using Panelwt4. past twenty years in the number of students who use community colleges as a gateway to universities. It is interesting to compare and contrast the quality choices of students in the sample. The 794 students graduated from 403 different colleges and the 155 uni- versity transfers initially attended 129 different colleges. The majority of colleges produced only one graduate. The maximum number of students to graduate from one institution was nine while the maximum number to trans- fer from one institution was six. Graduation universities varied from a minimum quality of 560 SAT points to a maximum of 1,360 SAT points. Transfer universities varied from a minimum quality of 641 SAT points to a maximum quality of 1360 SAT points. Finally, the maximum graduation quality for a university transfer was 1,345 SAT points. Hence, it appears that transferring does not necessarily preclude students from access to the highest quality universities. The work below divides graduation quality into six different ranges. 42 students graduated from universities between 500 and 800 SAT points, 143 graduated from universities between 800 and 900 SAT points, 239 graduated from universities between 900 and 1,000 SAT points, 220 graduated from universities between 1,000–1,100 SAT points, 85 gradu- ated from universities between 1,100–1,200 SAT points, and 66 graduated from universities between 1,200–1,400 SAT points. Comparing across educational paths, direct attendees graduate from the highest average quality universities. The graduation qualities of transfer students, both uni- versity and community college, are similar and, on aver- age, roughly twenty-seven SAT points lower than those of direct attendees. University transfers start at univer- sities that average nearly four SAT points higher in qual- ity than the universities from which they graduate. 10 That picture changes dramatically, however, once university transfers are subdivided into the groups that transfer to higher and lower quality universities, respectively. On average, students who transfer up increase quality by nearly 100 SAT points, while those that transfer down decrease quality by nearly 104 SAT points. Among uni- versity transfers, the largest increase in quality was 474 SAT points while the largest decrease in quality was 396 SAT points. In all, seventeen students decreased quality by more than 200 SAT points, twenty decreased quality by 100 to 200 SAT points, and forty-one decreased qual- ity by 0 to 100 SAT points. For university transfers who increased quality, fifteen increased quality by more than 200 SAT points, twenty-six increased quality by 100 to 200 SAT points, and thirty-six increased quality by 0 to 100 SAT points. Of the 32 transfer students who initially attended universities between 800 and 900 SAT points, 3 transferred to universities below 800 SAT points, 5 transferred to universities between 800 and 900 SAT points, 9 transferred to universities between 900 and 10 The author recognizes that several factors aside from the overall quality of an institution may affect a student’s decision to transfer to that institution. For example, the quality of specific major programs within a university may vary from the overall quality of the university. Students may certainly choose to transfer to an institution based to the quality of specific major programs. Clearly, controlling for the institution’s quality will not control for this fact. However, it is assumed that overall quality and major program quality are closely related in most cases. 51 M.J. Hilmer Economics of Education Review 19 2000 47–61 1,000 SAT points, 10 transferred to universities between 1,000 and 1,100 SAT points, 3 transferred to universities between 1,100 and 1,200 SAT points, and 2 transferred to universities greater than 1,200 SAT points. For the 52 initially attending universities between 900 and 1,000 SAT points, the numbers were 5, 11, 21, 12, 2, and 1, respectively. For the 40 initially attending universities between 1,000 and 1,100 SAT points, the numbers were 1, 10, 5, 18, 4, and 2, respectively. For the 11 initially attending universities between 1,100 and 1,200 SAT points, the numbers were 0, 4, 1, 2, 2, and 2, respect- ively. For the 10 initially attending universities between 1,200 and 1,400 SAT points, the numbers were 0, 1, 4, 2, 2, and 1, respectively. As might be expected, direct attendees spend the least amount of time pursuing their degrees while community college attendees spend the longest. Note however, that time to degree and work experience are inversely related. Among all college graduates, community college atten- dees have the most work experience while direct atten- dees have the least. Similarly, community college trans- fers transfer later in their career than university transfers. Together, these facts conform to conventional wisdom that community college attendees are more likely than university attendees to hold jobs while attending college. As a result, they often take lighter course loads, which require them to spend longer pursuing their degrees. At the same time, though, they are accumulating more job market experience than students who do not work. Finally, university transfers earn the highest average hourly wage, while community college transfers earn the lowest. Hourly earnings differ dramatically among uni- versity transfers depending on whether they increase or decrease quality. Specifically students who increase quality earn nearly 2.70 an hour more, on average, than those who decrease quality. This evidence suggests that substantial job-market screening, based on a student’s educational path, might exist in the post-baccalaureate labor market. Table 2 displays average values for the remaining explanatory variables. Comparing across educational paths reveals some interesting differences between trans- fer students and direct attendees. Looking first at individ- ual characteristics, transfer students are more likely than direct attendees to be either Hispanic or from the Other Race category, while direct attendees are more likely to be Black. On average, community college transfers per- form significantly worse on both standardized tests, receive lower high school grades, and have lower family incomes. This suggests that students who are of lower ability, perform poorly in high school, andor come from poorer families are the most likely to take advantage of the transfer function of community colleges. Such evi- dence might suggest that states can expand the edu- cational opportunities of students belonging to those groups by increasing their access to community colleges. Turning to university transfers, there are important dif- ferences between those students who transfer to higher quality schools and those who transfer to lower quality schools. University transfers who decrease quality have higher family incomes but also have lower standardized test scores and high school grades. Further, university transfers who decrease quality receive significantly lower grades while in college than those who increase quality. This suggests that there may be substantial mismatching between students and colleges at the time of admission, which leads students to transfer to different institutions at some point during their college careers. Specifically, because of their higher family incomes some students are initially able to attend higher quality universities despite the fact that they are of lower ability andor motivation levels. Consequently, they perform poorly at their initial institutions and are eventually forced to transfer to the lower quality institutions they should have initially attended. Conversely, because of their lower family incomes, some students are forced to attend lower quality institutions despite their higher ability andor motivation levels. Consequently, those students perform better at their initial institutions and are eventually able to transfer to the higher quality universities that they should have initially been able to attend. Further evi- dence for such a story is provided by the fact that univer- sity transfers who decrease quality graduate from univer- sities that are closer in quality to those initially attended by university transfers who increase quality. Likewise, university transfers who increase quality graduate from universities that are similar in quality to those initially attended by university transfers who decrease quality. College major choices also differ across educational paths. Community college transfers are less likely to receive engineering and education and letters degrees and are more likely to receive degrees in the other, mostly vocational, category. University transfers are less likely to graduate with business and science degrees and much more likely to graduate with engineering degrees. Again, degree choices differ dramatically between uni- versity transfers who increase quality and university transfers who decrease quality. Those who transfer up are nearly two and one-half times more likely to receive degrees in engineering, while those who transfer down are nearly twice as likely to receive business and science degrees. Finally, comparing institutional characteristics, com- munity college transfers are more likely to graduate from large institutions that are less likely to have research I status and grant Ph.D. degrees. Conversely, direct atten- dees and university transfers who decrease quality gradu- ate from schools that are, on average, roughly 2,000 stu- dents smaller and are more likely to have research I status and grant Ph.D. degrees. This suggests that stu- dents who start at community colleges are more likely to transfer to large, public universities. 52 M.J. Hilmer Economics of Education Review 19 2000 47–61 Table 2 Mean values for explanatory variables Direct Attendees All University University Transfer University Transfer Community College Transfers Up Down Transfer Individual Characteristics: Black 0.057 0.047 0.049 0.045 0.037 Hispanic 0.038 0.051 0.037 0.064 0.053 Other Race 0.018 0.015 0.020 0.010 0.043 Math Test 0.159 0.148 0.163 0.133 0.122 0.29 0.27 0.29 0.25 0.24 Reading Test 0.154 0.145 0.162 0.130 0.102 0.28 0.27 0.29 0.25 0.21 Family Income 5.100 5.344 5.169 5.522 5.040 1.58 1.49 1.62 1.33 1.71 HS Grades 3.352 3.249 3.250 3.248 3.052 0.54 0.58 0.62 0.55 0.57 College Performance: College GPA 2.990 3.032 3.082 2.984 2.948 0.51 0.53 0.50 0.55 0.54 College Major: Business 0.253 0.193 0.146 0.238 0.271 Engineering 0.204 0.233 0.340 0.130 0.167 Science 0.159 0.112 0.075 0.148 0.133 Social Science 0.223 0.229 0.167 0.288 0.244 Educ. and Letters 0.092 0.148 0.199 0.100 0.059 Other Major 0.069 0.085 0.073 0.096 0.126 Labor Market Experience: Employed in Major 0.235 0.262 0.262 0.261 0.249 Business 0.145 0.111 0.077 0.144 0.103 Engineering 0.109 0.149 0.226 0.074 0.081 Science 0.015 0.000 0.000 0.000 0.036 Social Science 0.019 0.044 0.029 0.059 0.038 Educ. and Letters 0.012 0.061 0.104 0.190 0.000 Other Major 0.044 0.048 0.053 0.039 0.072 Postgrad Degree 0.017 0.019 0.034 0.005 0.001 Postgrad Attendee 0.096 0.111 0.086 0.135 0.138 Full-time Employee 0.826 0.845 0.884 0.808 0.669 Institutional Characteristics: Research I 0.239 0.243 0.264 0.222 0.221 Doctoral Program 0.120 0.108 0.060 0.155 0.049 Enrollment 13,354.36 13,665.01 13,979.18 13,346.02 16,532.34 10,904.08 10,671.58 11,029.80 10,336.37 12,402.34 Number of 551 155 77 78 83 Observations Notes: Standard deviations are in parentheses. Observations with missing values are not included in the calculation of those variables. Data are weighted using Panelwt4.

3. Estimation and results