The effect of graduating with honors on earnings

We provide the first estimate of the effect of graduating with honors on the earnings of recent college graduates. To help distinguish between the causal effect of honors and unobservables correlated with obtaining honors, we use a regression discontinuity design that exploits the fact that Latin honors such as cum laude are determined based on strict GPA cutoffs. We test for and find no evidence of students manipulating their GPA in order to obtain honors. Honors provides an earnings benefits for the first two years following graduation but this benefit disappears by the third year after graduation. This provides among the first pieces of evidence that firms respond to signals at the higher education level.