Abstract
This paper decomposes the effect of college’s quality signalling on former students’ early labor market outcomes. We propose a new measure of the signal for college quality: the performance of the previous cohort that has graduated three years before the individual in the same institution and major. Using a unique administrative educational data set matched with the employer-employee data for Brazilian formal firms we are able to identify that an increase of 1 percentage point in the signal variable is related to up to 0.42% larger probability of being employed in the formal sector and an increase of up to 0.4% in the early career wage. We also investigate heterogeneity returns by gender, individual’s prior working experience and field of education. We control for both individual and institutional performance levels.
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