A working paper by Hiroshi Ono, Stockholm School of Economics European Institute of Japanese Studies
College-bound students in Japan undergo a process of intense preparation known as examination hell. An
extreme manifestation of examination hell is the ronin phenomenon. Typically thirty percent of students choose
the ronin option under which they spend years in addition to high school preparing for the next year’s college
entrance examinations. Using the mean scores of the entrance examinations as a measure of college quality, I
find that college quality significantly improves the internal rate of return (IRR) to college education among the
sample of male graduates in Japan. Ronin increases earnings indirectly by improving the quality of the college
attended. I also show that the IRR with respect to ronin is one of diminishing returns. On average, the number
of ronin years which maximizes the IRR is found to be somewhere between one and two years.
Extract and quote:
“The number of chief executive officers (CEOs) among companies listed in the Tokyo Stock Exchange, and the number of politicians and high-level bureaucrats.
Although not shown here, what is striking about the CEO ranking is that 49 percent are graduates from the top five, and 63 percent are graduates from the top ten universities.
Given that there are more than 600 universities in Japan, the fact that half of all CEOs are graduates of only the top five universities is compelling evidence that university credentials matter greatly in Japanese society. Undoubtedly, educational credentials are key determinants of success in other societies, but to a lesser extent. For example, comparable estimates suggest that the graduates of the top five universities comprise just 16.7 percent of managers
and directors among U.S. corporations.3
A study of Fortune 100 companies by Cappelli and Hamori (2004) shows that the proportion of executives who graduated from an Ivy League institution (as their first degree institution) was 10 percent in 2001.
Empirical studies have also documented the benefits of educational prestige in the Japanese labor market. Graduates of higher-ranking colleges achieve higher earnings (Ono, 2004a); they are also more likely to be selected from the labor queue for primary (versus secondary) employment (Sakamoto and Powers, 1995), to be employed by prestigious firms
(Abe, 1997; Higuchi, 1994), and to reach upper management positions…”
Read the paper in its entirety here…