The big sort: College reputation and labor market outcomes

We explore how college reputation affects the "big sort," the process by which students choose colleges and find their first jobs. We incorporate a simple definition of college reputation-graduates' mean admission scores-into a competitive labor market model. This generates a clear prediction: If employers use reputation to set wages, then the introduction of a new measure of individual skill will decrease the return to reputation. Administrative data and a natural experiment from the country of Colombia confirm this. Finally, we show that college reputation is positively correlated with graduates' earnings growth, suggesting that reputation matters beyond signaling individual skill.