Collective Reputation in Higher Education: An Equilibrium Model

Higher education is valued as a source of skills and knowledge, and also as means to signal. talent of degree holders. The second of these benefits, unlike the first one, could survive a decline of academic standards. A model of post-secondary education is considered where there are two categories of universities -mass and elite, and their separation is maintained by collective reputation. The model produces an equilibrium in which the university system can still be used for signaling but makes no contribution to the human capital accumulation. The model describes the outcomes of the recent transformation of the Russian university system which was driven primarily by the profit-seeking motives and witnessed precipitous drop of the quality of post-secondary education in both mass and elite segments. That model can also be used to assess policy reforms intended to make higher education more accessible and strengthen incentives for quality.