Elite schools and the formation of expectations of returns to education: evidence from Mexico City

This study examines whether, and in what ways, the attendance of elite high schools schools affect students ' expectations of the earnings returns to higher educational attainments. We use panel data for a sample of individuals who attend public senior-secondary schools of Mexico City between 2005 and 2008/9 and exploit the variations in admission to more selective schools generated by a centralized and competitive exam-based allocation process of students into public senior-high schools. We find that admission to an elite high school increases substancially both learning achievements and the earnings and returns expected from a college education. The results are consistent with students valuing the higher cognitive, and possibly non-cognitive, skills that they acquire in those elite schools. At the opposite, we find no higher effects on the expectations of students from more disadvantaged family background, suggesting that an imperfect information channel is not explaining our findings. Also, the lack of evidence of effects of admission to elite high schools on the earnings expected with only a high-school diploma tends to discard that the observed changes in expectations are driven by reputation effects in the labor market (i.e. a signaling channel). These findings bring evidence that the schooling environment provided by elite institutions can have benefits that extend beyond gains in scholastic achievements