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CEP discussion paper

Educational Returns, Ability Composition and Cohort Effects: Theory and Evidence for Cohorts of Early-Career UK Graduates


An increase over time in the proportion of young people obtaining a degree is likely to impact on the relative ability compositions (i) of graduates and non-graduates and (ii) across graduates with different classes of degree award. In a signalling framework, we examine the implications of this on biases across cohorts in estimates of educational returns. In an empirical analysis, we exploit administrative data on whole populations of UK university students for ten graduate cohorts to investigate the extent to which early labour market outcomes vary with class of degree awarded. Consistent with our theoretical model, we find that returns by degree class increased across cohorts during a period of substantial graduate expansion. We also corroborate the empirical findings with evidence from complementary data on graduate sample surveys.


Norman Ireland, Robin A. Naylor, Jeremy Smith and Shqiponja Telhaj

July 2009     Paper Number CEPDP0939

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This CEP discussion paper is published under the centre's Education and skills programme.