Graduate education and employee performance: evidence from military personnel; Economics of Education Review, v. 18, (1999), 453-463.

Abstract

Few studies have examined the relationship between on-the-job productivity and graduate education using single-firm data. This paper studies the effect of graduate education on job performance using a unique micro-database consisting of military officers. Supervisor ratings and promotion probabilities are examined for professional and technical officers in the US Navy, a hierarchical organization with an internal labor market and up-or-out promotion policies. Singlestage estimates indicate that, among those eligible to be considered for promotion to grade 4, the up-or-out point, those with any graduate degree are more likely to be promoted. The effect is especially pronounced for those who receive a degree via the Navyâ s sponsored, full-time program. However, when instruments that are uncorrelated with promotion are used to predict graduate degree status, the results suggest that a sizeable portion of the relationship between graduate education and promotion is due to unobserved attributes that lead some people to attend (or to be selected for) graduate school and to be more promotable. The selection-corrected estimates of the promotion effect of graduate education are reduced by between 40 and 50%.