These observations are consistent with my own experience. Growing up in Iowa, I remember many academically talented students from my high school (often children of professors) simply attending the local state university by default. Today, those same kids would be angling for admission to the Ivy league, Stanford, MIT, Caltech, etc.
However, it's not clear what caused this increased interest in elite education...
Near the end of the paper Hoxby reviews the literature on the returns to elite higher education. Her estimates of the rate of return are on the high side (definitely worthwhile, in her Harvard summa and Rhodes opinion ;-), and she casts some doubt on the Dale and Krueger study which compared elite graduates against others who were accepted to an elite school but chose not to attend. Dale and Krueger concluded that the choice of college had little impact on future earnings, but Hoxby suggests there was something "odd" about the 1 in 10 kids who declined elite admission :-)
See related posts returns to elite education , higher education and human capital.
Note to efficient market / rational agent / Chicago School believers: apparently even leading economists cannot agree on the size of returns to elite education. The economists, who are able to look backward in time and use massive statistics, have a much easier task than an individual student, who has to look forward 30 years to decide which choice is better. (Sound like projecting the cash flows from a bundle of mortgages over the next 30 years?) Therefore, it is hard to believe that individuals are clever enough to act like "rational agents" in solving this problem, or making any other life decision.
The Changing Selectivity of American Colleges
Caroline M. Hoxby
NBER Working Paper No. 15446*
Issued in October 2009
This paper shows that although the top ten percent of colleges are substantially more selective now than they were 5 decades ago, most colleges are not more selective. Moreover, at least 50 percent of colleges are substantially less selective now than they were then. This paper demonstrates that competition for space--the number of students who wish to attend college growing faster than the number of spaces available--does not explain changing selectivity. The explanation is, instead, that the elasticity of a student's preference for a college with respect to its proximity to his home has fallen substantially over time and there has been a corresponding increase in the elasticity of his preference for a college with respect to its resources and peers. In other words, students used to attend a local college regardless of their abilities and its characteristics. Now, their choices are driven far less by distance and far more by a college's resources and student body. It is the consequent re-sorting of students among colleges that has, at once, caused selectivity to rise in a small number of colleges while simultaneously causing it to fall in other colleges. I show that the integration of the market for college education has had profound implications on the peers whom college students experience, the resources invested in their education, the tuition they pay, and the subsidies they enjoy. An important finding is that, even though tuition has been rising rapidly at the most selective schools, the deal students get there has arguably improved greatly. The result is that the "stakes" associated with admission to these colleges are much higher now than in the past.
More here from the Atlantic Monthly:
... The researchers Alan Krueger and Stacy Berg Dale began investigating this question, and in 1999 produced a study that dropped a bomb on the notion of elite-college attendance as essential to success later in life. Krueger, a Princeton economist, and Dale, affiliated with the Andrew Mellon Foundation, began by comparing students who entered Ivy League and similar schools in 1976 with students who entered less prestigious colleges the same year. They found, for instance, that by 1995 Yale graduates were earning 30 percent more than Tulane graduates, which seemed to support the assumption that attending an elite college smoothes one's path in life.
But maybe the kids who got into Yale were simply more talented or hardworking than those who got into Tulane. To adjust for this, Krueger and Dale studied what happened to students who were accepted at an Ivy or a similar institution, but chose instead to attend a less sexy, "moderately selective" school. It turned out that such students had, on average, the same income twenty years later as graduates of the elite colleges. Krueger and Dale found that for students bright enough to win admission to a top school, later income "varied little, no matter which type of college they attended." In other words, the student, not the school, was responsible for the success.
... Which brings us back to the Krueger-Dale thesis. Can we really be sure Hamilton is nearly as good as Harvard?
Some analysts maintain that there are indeed significant advantages to the most selective schools. For instance, a study by Caroline Hoxby, a Harvard economist who has researched college outcomes, suggests that graduates of elite schools do earn more than those of comparable ability who attended other colleges. Hoxby studied male students who entered college in 1982, and adjusted for aptitude, though she used criteria different from those employed by Krueger and Dale. She projected that among students of similar aptitude, those who attended the most selective colleges would earn an average of $2.9 million during their careers; those who attended the next most selective colleges would earn $2.8 million; and those who attended all other colleges would average $2.5 million. This helped convince Hoxby that top applicants should, in fact, lust after the most exclusive possibilities.
"There's a clear benefit to the top fifty or so colleges," she says. "Connections made at the top schools matter. It's not so much that you meet the son of a wealthy banker and his father offers you a job, but that you meet specialists and experts who are on campus for conferences and speeches. The conference networking scene is much better at the elite universities." Hoxby estimates that about three quarters of the educational benefit a student receives is determined by his or her effort and abilities, and should be more or less the same at any good college. The remaining quarter, she thinks, is determined by the status of the school—higher-status schools have more resources and better networking opportunities, and surround top students with other top students.
"Today there are large numbers of colleges with good faculty, so faculty probably isn't the explanation for the advantage at the top," Hoxby says. "Probably there is not much difference between the quality of the faculty at Princeton and at Rutgers. But there's a lot of difference between the students at those places, and some of every person's education comes from interaction with other students." Being in a super-competitive environment may cause a few students to have nervous breakdowns, but many do their best work under pressure, and the contest is keenest at the Gotta-Get-Ins. Hoxby notes that some medium-rated public universities have established internal "honors colleges" to attract top performers who might qualify for the best destinations. "Students at honors colleges in the public universities do okay, but not as well as they would do at the elite schools," Hoxby argues. The reason, she feels, is that they're not surrounded by other top-performing students.