Saturday, April 24, 2010

College rankings: how they influence applicants, and colleges

A recent paper discusses the impact of the US News and World Report rankings of colleges:

"Why is First Best? Responses to Information Aggregation in the U.S. News College Rankings," by Michael Luca and Jonathan Smith, both grad students at BU.

Here is the abstract: "We present robust evidence that the U.S. News college rankings causally affect college choice beyond their informational content about school quality. Using multiple identification strategies, we estimate that an exogenous one rank improvement leads to a 0.3%-0.9% increase in applications. We explore two potential explanations of the rank effect, showing evidence that students use rankings to improve coordination and to reduce cognitive costs of information processing. Using a novel natural experiment, we then consider the incentives that rankings create for schools. Our results suggest that the rankings caused significant changes to admissions policies, causing schools to favor students who do well along dimensions used in the rankings."

The final section of the paper, called "Rankings as a Mechanism Design Problem" concludes:
"While gaming of the USNWR rankings has come to have a very negative connotation, the rankings also present a mechanism that will only grow in importance over time. In particular, the mere presence of information provides incentives for schools to change their behavior. Further, USNWR provides one of the largest and most sophisticated examples of rankings as an accountability mechanism for schools. We have shown that the existence of the rankings led schools to focus more on attracting students who come from the top 10% of their class and have high SAT scores, probably at the expense of good students who performed worse along these observable measures. However, we have also shown that the rankings led to higher graduation rates. In net, the rankings have served their purpose by holding schools accountable for their decisions. The rankings created high powered incentives to which schools respond. This shows hope that information provision can become an important part of improving schools, especially in settings where there is school choice. As high schools and elementary schools around the country continue to look for new mechanisms in the challenging problem of school accountability, USNWR can help to highlight some of the positive and negative consequences that we should expect to see.

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