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A Signaling Theory Of Grade Inflation

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  • William Chan
  • Li Hao
  • Wing Suen

Abstract

When employers cannot tell whether a school truly has many good students or just gives easy grades, a school has incentives to inflate grades to help its mediocre students, despite concerns about preserving the value of good grades for its good students. We construct a signaling model where grades are inflated in equilibrium. The inability to commit to an honest grading policy reduces the efficiency of job assignment and hurts a school. Grade inflation by one school makes it easier for another school to do likewise, thus providing a channel to make grade exaggeration contagious. Copyright 2007 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 48 (2007)
Issue (Month): 3 (08)
Pages: 1065-1090

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Handle: RePEc:ier:iecrev:v:48:y:2007:i:3:p:1065-1090

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Cited by:
  1. Alessandro Tampieri, 2013. "Students' Social Origins and targeted Grade Inflation," CREA Discussion Paper Series 13-28, Center for Research in Economic Analysis, University of Luxembourg.
  2. Popov, Sergey V. & Bernhardt, Dan, 2010. "University Competition, Grading Standards and Grade Inflation," MPRA Paper 26461, University Library of Munich, Germany.
  3. Maria, De Paola, 2008. "Are easy grading practices induced by low demand? Evidence from Italy," MPRA Paper 14425, University Library of Munich, Germany.
  4. Gwendolyn R. Tecson, 2011. "Trends in Grades, UP School of Economics," UP School of Economics Discussion Papers 201102, University of the Philippines School of Economics.
  5. Damiano, Ettore & Li, Hao & Suen, Wing, 2006. "Credible Ratings," Microeconomics.ca working papers damiano-06-01-17-01-56-45, Vancouver School of Economics, revised 17 Jan 2006.
  6. A. Tampieri, 2011. "Social Background Effects on School and Job Opportunities," Working Papers wp779, Dipartimento Scienze Economiche, Universita' di Bologna.
  7. Babcock, Phillip, 2009. "Real Costs of Nominal Grade Inflation? New Evidence from Student Course Evaluations," University of California at Santa Barbara, Economics Working Paper Series qt4823c3jx, Department of Economics, UC Santa Barbara.
  8. Himmler, Oliver & Schwager, Robert, 2007. "Double Standards in Educational Standards: Are Disadvantaged Students Being Graded More Leniently?," ZEW Discussion Papers 07-016, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Maria De Paola, 2011. "Easy grading practices and supply–demand factors: evidence from Italy," Empirical Economics, Springer, vol. 41(2), pages 227-246, October.
  10. Rick Harbaugh & Eric Rasmusen, 2012. "Coarse Grades: Informing the Public by Withholding Information," Working Papers 2012-06, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  11. Rebecca Summary & William Weber, 2012. "Grade inflation or productivity growth? An analysis of changing grade distributions at a regional university," Journal of Productivity Analysis, Springer, vol. 38(1), pages 95-107, August.
  12. Schwager, Robert, 2012. "Grade inflation, social background, and labour market matching," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 56-66.
  13. Cory Koedel, 2010. "Grading Standards in Education Departments at Universities," Working Papers 1002, Department of Economics, University of Missouri, revised 13 Jun 2011.

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