Specialists or All-Rounders: How Best to Select University Students?

I study whether universities should select their students on the basis of only specialized subject-specific tests or a broader set of skills and knowledge. Theoretically, I show that even if broader skills do not improve the outcomes of graduates in the labor market, a university optimally chooses to use them as a criterion for selection alongside the mastery of more subject-specific tools. Empirically, I exploit the variation between subject-specific and nonspecific entrance exam sets on a large administrative dataset of Portuguese students. My central finding is that universities with less specialized admission policies admit a pool of students who obtain a higher final GPA.