The literature on the Mincer wage equation presents evidence of a college premium: more years of schooling is related to bigger earnings; education quantity matters. However, given that one attends college, also the quality of the higher education institution could affect the job market outcomes. Does college quality matter? When individuals enter the job market after graduation, the employers cannot perfectly observe neither the individual’s ability nor the quality of the college. In this paper, we use data from Brazil for students who entered college between 2004 and 2006 and might be in the formal job market up to 2014. As proxies for the individual’s ability revealed over time to the employer, we use their results at Enem (National High School Exam) and Enade (National Exam for the Assessment of Student Performance, for Higher Education), and RAIS (Annual Reports of Social Information) for the formal job market outcomes. As signals of college quality, besides the proposed measures in the literature, we propose another measure: the previous cohort’s performance in the job market, who has graduated from the same college program three years before. The hypothesis is that the previous cohort’s performance may affect the employers’ perception of graduates from the same college program, and this effect is expected to decrease over time. Our results show that, even after controlling for measures of the individuals’ performance, the previous cohort presence in the job market is a good signal for the employers, since it predicts the job market outcomes up to 6 years after graduation. The results vary across college major and gender.
Reading material: The Big Sort: College Reputation and Labor Market Outcomes