The Winner's Curse in Test-Blind Admissions (link)
When universities admit students without considering exam scores, how does this impact test effort? How universities screen students? The overall match? We examine these with evidence from the UK.
High-stakes final exams shape students’ educational paths in two ways: universities can screen applicants with more information about their ability, changing the equilibrium match, and exams may create incentives for students to exert effort. We study these forces using the staggered introduction of unconditional offers in UK university admissions, which allowed students to matriculate regardless of results from their age-18 exams (A-levels). Students who accept an unconditional offer score 0.14 SD below observably similar students who decline one, and so programs that make unconditional offers face a winner’s curse. We show this gap reflects students’ private information rather than reduced effort: using a two-way fixed effects design, we find that exposure to unconditional offers has a precisely estimated null effect on students’ age-18 exam performance. Unconditional offers have positive match effects for recipients: exposure increases matriculation by 1.1pp, largely at middle-tercile universities. Using a structural model, we find that unconditional offers are anti-meritocratic, as they benefit the lowest-achieving quartile of students at the expense of higher-achieving students, lowering total welfare by 0.5% relative to a ban. Post-qualification admissions, under which students apply after receiving their scores, raise welfare by 14.2% through better sorting. This gain is mostly attributable to increased information for both sides of the market rather than to the change to a single-stage admissions system. Our results inform current policy debates in the UK, highlighting how the distributional effects of admissions policies depend on student information.
This paper’s come a long way from its beginnings, and I’m very happy with how it’s turned out. There’s a lot more I’m now interested in studying in the UK, but I think this work answers some important questions about how university admissions should be designed. Excited for this to be my Job Market Paper!