Grade Inflation

SSRN Electronic Journal, 2003

This paper explores information disclosure in matching markets, e.g. the informativeness of transcripts given out by universities. We show that the same amount of information is disclosed in all equilibria. We then demonstrate that if universities disclose the equilibrium amount of information, students and employers will not find it profitable to contract early; if they disclose more, unraveling will occur.

2012

Grades are the fundamental currency of our educational system; they incentivize student performance and academic behavior, and signal quality of student academic achievement to parents, employers, postsecondary gatekeepers, and students themselves. Grade inflation compromises the value of grades and undermines their capacity to achieve the functions for which they are intended. I challenge the 'increases in grade point average' definition of grade inflation employed by critics and argue that grade inflation must be understood in terms of the signaling power of grades. Analyzing data from four nationally representative samples of high school students, I find that in the decades following 1972: (a) grades have risen at high schools and dropped at four-year colleges, in general, and selective four-year institutions, in particular; and (b) the signaling power of grades has attenuated little, if at all. I conclude that the concerns of critics who warn of rampant grade inflation are misplaced. Grades at secondary and postsecondary institutions are just as meaningful now as they were four decades ago.

Educational Researcher, 2013

SSRN Electronic Journal, 2011

Grade in ‡ation or soft grading is a common feature of the educational systems of many countries. In this paper I analyse grade in ‡ation in a setting in which students di¤er in social background, and the grading policy can be targeted according to student type. I consider a signalling game where …rms decide whether to hire students and their salary after observing their grades and social background, a university can in ‡ate grades, when students decide whether to attend university. A targeted grade in ‡ation may have redistributive e¤ects by raising the salary of students with disadvantaged social background, if their grades are less in ‡ated than other students'. JEL Numbers: D82, I21.

2005

Grading policy is a competition variable of universities, departments, and professors. Recently, empirical evidence on and public discussions about grade inflation and its negative consequence of making grades more noisy signals of true abilities have been widespread in academia and the media. We use a simple and stylized industrial economics model to examine incentives for grade inflation for a monopolistic university and for a duopoly of universities competing for students and funds. In particular, we examine both public and private universities and highlight the links between grading, university financing and competition between universities. We find strong incentives for upwardly distorted grades in all settings. Even public financing does not prevent universities from inflating grades as long as funding depends on the number of students and employers use grades as signals of productivity.

Journal of Economics, 2010

We examine the role of school grades as a signal of worker productivity under different examination systems in relation to errors that may affect student performance. Firms use school grades as a signal of workers’ effective skills, taking into account that these evaluations are effected by stochastic shocks. We show that more precise evaluation systems, being associated with a higher reactivity of wages to school grades, induce students to provide more effort. Low ability students tend to react less than high ability students. Moreover, individuals with low abilities may prefer less accurate evaluation systems. Nevertheless, when productivity increases, these systems become less convenient and the number of individuals preferring them diminishes. Our analysis highlights an important trade-off between centralised and decentralised evaluation systems. On the one hand, frequent evaluations, typical of decentralised systems, weaken the impact on grades of those errors which influence student performance and, so, reduce signal noise, while, on the other hand, different teachers generally adopt different performance assessment standards, leading to noisier evaluations.

2008

In this paper we examine the signalling value for skills of different examination systems in relation to errors that may affect grades obtained by students. Firm use school grades as a signal of the effective skills of workers, taking into account that evaluation are effected by stochastic shocks. We show that more precise evaluation systems, being associated to a higher reactivity of wages to school grades, induce an higher level of student effort. However, the effect is heterogeneous: low ability students tend to react less compared to high ability students. Moreover, from our analysis, it emerges that individuals endowed with low abilities may prefer less accurate evaluation systems. Nevertheless, when productivity increases the convenience of these systems reduces and the number of individuals preferring them shrinks. Our analysis highlights an important trade-off between centralized and decentralized evaluation systems. Frequent evaluations, typical of decentralized systems, reduce the impact on grades of errors that influence student performance and in this way diminish signal noise, on the other hand, different teachers generally adopt different performance assessment standards, and this tends to produce noisier evaluations. Conversely, centralized systems use common evaluation standards, but their frequency is limited by relevant administration costs and then produce evaluations that are more affected by errors influencing student performance. In the final part of the paper we investigate the relationship between the optimal class size and evaluation systems. We show that under decentralized evaluation systems the class size also affects the signal noise, since larger classes may reduce the frequency of evaluations undertaken by teachers.

Economic Inquiry

We develop a model of strategic grade determination by universities distinguished by their distributions of student academic abilities. Universities choose grading standards to maximize total wages of graduates. Job placement and wages hinge on a firm's productivity assessment given a student's university, grade and productivity signal. We identify conditions under which better universities set lower grading standards, exploiting the fact that firms cannot distinguish between "good" and "bad" "A"s. In contrast, a social planner sets stricter standards at better universities. We show how increases in skilled jobs drive grade inflation, and determine when grading standards fall faster at better schools.

Oxford Agrarian Studies

Grades are fundamental to all markets. This examines the conceptual and economic basis for analysing them.

2002

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