A Note on Grade Inflation and University Competition

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.

Educational Researcher, 2013

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.

SSRN Electronic Journal, 2000

When employers cannot tell whether a school truly has many good students or whether it is just giving easy grades, schools have an incentive to in ate grades to help their mediocre students. However schools also care about preserving the value of good grades for their good students. We construct a signaling model in which grade in ation is the equilibrium outcome. The inability to commit to an honest grading policy in an environment of private information reduces the informativeness of grades and hurts the school. We also show that grade in ation by one school makes it easier for another school to fool the market with grade in ation. Hence easy grades are strategic complements, and this provides a channel to make grade in ation contagious.

SSRN Electronic Journal, 2000

In this paper we construct a theory about how the expansion of higher education could be associated with several factors that indicate a decrease in the quality of degrees. We assume that the expansion of tertiary education takes place through three channels, and show how they are likely to reduce average study time, academic requirements and average wages, and inflate grades.

2002

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Although grade inflation is unfair and may imply inefficient allocation of human resources, current knowledge of grade inflation effects on individual outcomes is scarce. One explanation is probably the challenge of measuring and estimating causal grade inflation effects. This study examines the consequences of grade inflation at the upper secondary education level on enrolment in higher education and earnings for Sweden. Rigorous diagnostic testing supports our empirical approach. Grade inflation at the school level affects earnings mainly through choice of university and the chosen field of education, rather than through enrolment per se, because attending universities of higher quality and pursuing high-paying fields of education have a substantial impact on earnings. On the other hand, high-skilled students attending upper secondary schools without grade inflation and, unexpectedly, low-skilled women attending “lenient” schools are harmed by this. This causes extensive unfairness and, plausibly, detrimental welfare effects.

CESifo Economic Studies, 2008

This article documents that grades vary significantly across Italian public universities and degrees. We provide evidence suggesting that these differences reflect the heterogeneity of grading standards. A straightforward implication of this result is that university funding schemes based on students' academic performance do not necessary favour universities that generate higher value added. We test this for the case of the Italian funds allocation system, which rewards universities according to the number of exams passed by their students. We find that university departments that rank higher according to this indicator actually tend to be significantly worse in terms of their graduates' performance in the labour market. (JEL codes: I2, J31, J64)

Perceptual and Motor Skills, 2000

Considerable research has been conducted on grade inflation and its pervasiveness. Given the significance of grade inflation on the quality of the educational experience and the reputations of colleges and universities, efforts to assess its presence and underlying causes should be supported and solutions developed. Because periodic changes in average grades in the short term may be anomalous, mean grade point averages (GPAs) for 262 undergraduate courses at a Liberal Arts college were examined for trends across a 10-yr. period. Analysis showed higher grades appeared within two of the colleges' four academic units, although the reasons remained unclear. Tentative explanations are explored.

A critical reflection on the economic literature concerning grade inflation, especially in the Ivy League, followed by a comprehensive review of the most common justifications for this phenomenon, and finally, possible non-drastic measures that can be suitably implemented to mitigate its effects...