One Point on the Lsat: How much is it Worth? Standardized Tests as a Determinant of Earnings

Abstract

This paper examines the market for certification of ability, specifically in the law profession. Economists have long discussed the problems of measurement and signaling in the imperfect market for labor, but there has been relatively little systematic work on the economic value of these signals. Using empirical evidence comparing Law School Admission Test scores to starting salaries, both across law schools and across individuals in one law school, I discuss the economic value of one point on the LSAT. I find that the marginal value of one point on the LSAT, without controlling for school quality, is over $2,600 in the first year alone, with the value increasing each year. However, when controlling for school quality, one point on the LSAT is worth only a small fraction of that amount. I conclude that the LSAT, while an important determinant of future success, exerts little weight beyond the law school application.