University selectivity and the relative returns to higher education: Evidence from the UK

We study the wage outcomes of university graduates by course (i.e. by subject and institution) using the UK Labour Force Surveys (LFS). We show that the selectivity of undergraduate degree programmes plays an important role in explaining the variation in the relative graduate wages. In fact, we find that much of the variation in relative wages across courses is due to the quality of students selected. Once we allow for course selectivity in our analysis we find that our estimates of the effects of attending the most prestigious HEIs is around 10 percentage points lower than otherwise; the effects of attending the middle ranking HEIs is around 5 percentage points lower; and that of attending these lowest ranking HEIs is unaffected. We go on to consider selection (on observables) into subjects and institutions using the Inverse Probability Weighted Regression Adjusted (IPWRA) method to estimate multiple treatment effects.