Few studies have examined the relationship between on-the-job productivity and graduate education using single-firm
data. This paper studies the effect of graduate education on job performance using a unique micro-database consisting of
military officers. Supervisor ratings and promotion probabilities are examined for professional and technical officers
in the US Navy, a hierarchical organization with an internal labor market and up-or-out promotion policies. Singlestage
estimates indicate that, among those eligible to be considered for promotion to grade 4, the up-or-out point, those
with any graduate degree are more likely to be promoted. The effect is especially pronounced for those who receive
a degree via the Navyâ s sponsored, full-time program. However, when instruments that are uncorrelated with promotion
are used to predict graduate degree status, the results suggest that a sizeable portion of the relationship between graduate
education and promotion is due to unobserved attributes that lead some people to attend (or to be selected for) graduate
school and to be more promotable. The selection-corrected estimates of the promotion effect of graduate education are
reduced by between 40 and 50%
