The results of a new paper are mixed:
We find that the return to college selectivity is sizeable for both cohorts in regression models that control for variables commonly observed by researchers, such as student high school GPA and SAT scores. However, when we adjust for unobserved student ability by controlling for the average SAT score of the colleges that students applied to, our estimates of the return to college selectivity fall substantially and are generally indistinguishable from zero. There were notable exceptions for certain subgroups. For black and Hispanic students and for students who come from less-educated families (in terms of their parents’ education), the estimates of the return to college selectivity remain large, even in models that adjust for unobserved student characteristics.
Ambition seems to matter — I think that’s one of the “unobserved” traits at work here. If two kids have the same SAT score and GPA, and yet one student applies to loftier schools, the more aggressive one will tend to get more from his education.