Valuable Experience: How University Internships Affect Graduates' Income

Abstract

This paper analyzes whether and how attending an internship during tertiary education affects income. We address endogeneity with an IV approach that exploits information regarding whether the internship was a mandatory component of the study. We further address selection into programs with mandatory internship by using the share of mandatory internships at the closest university, exploiting the low mobility of Swiss students. The results show that internships increase graduates' incomes. We explore potential mechanisms for the effect of internships on income, finding that general human capital is the main mechanism rather than firm- or field-specific human capital, signaling, or screening. These results indicate that students should continue to invest in internships and that mandatory internships have a place in university curricula because they improve the quality of education.