Effects of German Universities' Excellence Initiative on Ability Sorting of Students and Perceptions of Educational Quality

We investigate potential spillover effects from the German Excellence Initiative on university education. Using data from a representative student survey, we find that winning the competition allows universities to enroll significantly better high-school graduates in three subsequent admission terms. We then investigate a possible channel explaining the effect on admissions by studying whether the excellence label improves students' perception of educational quality. We find that the label significantly improves students' ratings of a university's educational quality and their job market expectations immediately following the award. However, ratings largely return to previous levels when students are surveyed three years later, although the status persists. (JEL: D81, H52, I23, I24)