More than Sheepskin: A Natural Experiment on College and Earnings

Evidence shows college increases earnings, but little causal evidence distinguishes whether these earnings come through human capital gains or from the signal a college degree sends. We use the unique situation created by the First World War, where several cohorts of West Point cadets were unexpectedly graduated early. These early graduates never saw combat in the war but were awarded a college degree---typically a four-year degree---after completing only two or three years of school. Using 1940 census data, we find an additional year of college leads to a 10-15% increase in earnings 20 years post-graduation.