A question of degree: the effects of degree class on labor market outcomes

In this paper we estimate the sorting effects of university degree class on initial labor market outcomes using a regression discontinuity design that exploits institutional rules governing the award of degrees. Consistent with anecdotal evidence, we find sizeable and significant effects for Upper Second degrees and positive but smaller effects for First Class degrees on wages. In additional results we explore differences across groups and find evidence consistent with a simple model of statistical discrimination on the basis of gender and types of degree programmes. When we split the sample by ability, we find that the signaling effects are similar in the high ability group but stronger for Upper Second degrees in the lower ability group. The evidence points to the importance of sorting in the high skills labor market