Caroline Hoxby finds, in a recent study, that the 10% most selective colleges and universities have become more selective since 1962 while the majority of colleges have become less selective. This seems to be related to an increasing willingness of students to attend more distant colleges and universities (possibly due to decreasing transportation and communication costs). Since the most selective institutions receive a larger and more geographically diverse applicant pool, they have been able to become increasingly selective. Increases in financial aid awards at select colleges have further raised the quality of the applicant pool by lowering the relative cost of attendance.
As the most selective colleges and universities have become more selective, the majority of colleges and universities have become less selective. This leads to a growing gap in the average measured quality of students in elite institutions and those in other institutions. On the one hand, this may mean that students end up selected into institutions in which there is more homogenous levels of human capital among entering freshman. This may be desirable for society t0 the extent to which it makes it possible to tailor instruction to students with relatively similar prior academic backgrounds and preparation. To the extent that students learn from their peers, though, the growing homogeneity of student ability within institutions could lead to a growing gap in the amount of human capital accumulation in college. While interactions among the best and the brightest students help to enhance their learning, students in most institutions will have a smaller proportion of peers in the upper tail of the measured ability/performance distributions. The relative rate of return to “select” institutions may continue to rise relative to that of attending more typical colleges and universities if this student quality differential continues to expand.
When I read about this work, I thought of the reason why they’re getting more selective. It would seem that parents and their offspring feel that elite and near-elite schools offer a greater return than they did in the past (and thus more willing to go long distances). I wonder on how that came about? Maybe part of it is declining transportation and communication costs, but of course those are a small share of the cost of higher ed. With http://ideas.repec.org/p/nbr/nberwo/7322.html in mind, perhaps many of these parents are mistaken?
While transportation and communication costs may be small relative to the overall cost of college, the issue here is not whether to attend college, but where to apply. For many students, remaining close to their friends is a real cost… With Facebook, instant messaging, unlimited cell phone minutes, Skype, and other similar changes, it is much easier to maintain these connections from a greater distance. Declining airfares and rising incomes makes it easier to travel larger distances as well. There is not much evidence of a change in the relative labor market payoff to more selective colleges, but these other costs have declined quite substantially in the last few decades.