Does an expensive private university education actually cause your future earnings to rise?
Graduates of private universities earn 14% more than their public university counterparts. But does the degree itself cause this wage gap, or is it selection bias? This video explores how economists use randomized trials and regression to isolate the true impact of elite schooling on your paycheck.
The core problem in evaluating the return on a private university education is selection bias. While raw data shows a 14% earnings premium for private graduates, this correlation does not necessarily imply causation. Students who attend private institutions may differ from public university students in ways that already predispose them to higher earnings, regardless of the school they attend.
To move beyond simple correlations, the video demonstrates how econometrics employs randomized trials and regression analysis. By stripping away theoretical tedium, these methods allow researchers to test whether the university experience itself is the driver of financial success or if other variables are at play.
Source: Selection Bias: Will You Make More Going to a Private University?
