Essays in the Economics of Education

Student selection procedures are a major factor in determining who is able to enter universities. In Finland, one of the main selection mechanisms is selection based on success in program-specific entrance exams. As a result of this selection procedure, the vast majority of applicants are rejected, and over 70% of marginally rejected applicants reapply a year after the rejection. The first essay of this dissertation studies the disparate effects of failure in these entrance exams on individuals who come from different socioeconomic backgrounds. The results show that marginally rejected high-SES applicants are more likely to enroll in university in the forthcoming years than their low-SES counterparts. This effect is mostly driven by higher success rate of high-SES reapplicants rather than differences in reapplication rates. Additionally, I show that low-SES applicants respond to failure by enrolling in vocational universities more often than high-SES applicants, thus contributing to segregation in higher education. The second essay studies the effects of university major switching on dropout probability. I follow individuals who are already studying in a university, but reapply through the same system as other applicants. As a result, I achieve quasi-random variation in major switching, as some individuals are successful when attempting a switch while others are not. By using regression discontinuity design, I find that a successful switch decreases the probability of dropping out. Also, switching seems to increase graduation rates after a few years. Moreover, the results suggest that the effects are driven by an increase in student-major match quality. The third essay analyzes the effects of selective schools on students' educational and labor market outcomes. We utilize regression discontinuity design based on the centralized admission system of upper secondary schools in Finland to obtain quasi-random variation for selective high school offers and attendance. By using nationwide administrative data, we first show that the selective schools do not improve high school exit exam scores, even though there is a large jump in peer quality for students attending selective schools. Despite lacking short-term impacts, we find that selective schools increase university enrollment and graduation in the long run. Yet, we do not observe positive effects on income. Importantly, our results suggest that selective high schools or better peer groups do not improve students' human capital or skills, but affect their preferences on educational choices after the secondary school.