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Performance-related Funding of Universities: Does More Competition Lead to Grade Inflation?

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  • Bauer, Thomas K.

    ()
    (RWI)

  • Grave, Barbara S.

    ()
    (RWI)

Abstract

German universities are regarded as being under-financed, inefficient, and performing below average if compared to universities in other European countries and the US. Starting in the 1990s, several German federal states implemented reforms to improve this situation. An important part of these reforms has been the introduction of indicator-based funding systems. These financing systems aimed at increasing the competition between universities by making their pubic funds dependent on their relative performance concerning different output measures, such as the share of students obtaining a degree or the amount of third party funds. This paper evaluates whether the indicator-based funding created unintended incentives, i.e. whether the reform caused grade inflation. Estimating mean as well as quantile treatment effects, we cannot support the hypothesis that increased competition between universities causes grade inflation.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6073.

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Length: 23 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:iza:izadps:dp6073

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Keywords: grade inflation; higher education funding; university competition;

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  1. Kocher, Martin G. & Luptacik, Mikulas & Sutter, Matthias, 2006. "Measuring productivity of research in economics: A cross-country study using DEA," Socio-Economic Planning Sciences, Elsevier, vol. 40(4), pages 314-332, December.
  2. Randall Reback, 2006. "Teaching to the Rating: School Accountability and the Distribution of Student Achievement," Working Papers 0602, Barnard College, Department of Economics.
  3. Adele Atkinson & Simon Burgess & Bronwyn Croxson & Paul Gregg, 2004. "Evaluating the Impact of Performance-related Pay for Teachers in England," The Centre for Market and Public Organisation 04/113, Department of Economics, University of Bristol, UK.
  4. Pedro S. Martins, 2010. "Individual teacher incentives, student achievement and grade inflation," LSE Research Online Documents on Economics 28285, London School of Economics and Political Science, LSE Library.
  5. B. Curtis Eaton & Mukesh Eswaran, 2008. "Differential Grading Standards and Student Incentives," Working Papers 2008-11, Department of Economics, University of Calgary, revised 13 Jan 2008.
  6. Markus Frolich & Blaise Melly, 2010. "Estimation of quantile treatment effects with Stata," Stata Journal, StataCorp LP, vol. 10(3), pages 423-457, September.
  7. Kocher, Martin G. & Luptácik, Mikulás & Sutter, Matthias, 2006. "Measuring productivity of research in economics: A cross-country study using DEA," Munich Reprints in Economics 18192, University of Munich, Department of Economics.
  8. Siegfried, John J & Fels, Rendigs, 1979. "Research on Teaching College Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 17(3), pages 923-69, September.
  9. Simon Burgess & Carol Propper & Helen Slater & Deborah Wilson, 2005. "Who wins and who loses from school accountability? The distribution of educational gain in English secondary schools," The Centre for Market and Public Organisation 05/128, Department of Economics, University of Bristol, UK.
  10. Manuel Bagues & Mauro Sylos Labini & Natalia Zinovyeva, 2008. "Differential Grading Standards and University Funding: Evidence from Italy," Working Papers 2008-07, FEDEA.
  11. David A Love & Matthew J Kotchen, 2010. "Grades, Course Evaluations, and Academic Incentives," Eastern Economic Journal, Palgrave Macmillan, vol. 36(2), pages 151-163, Spring.
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Cited by:
  1. Claudia Burgard & Barbara S. Grave, 2013. "Does it Pay Off to Incentivize Universities? – Performance Funding in the German Higher Education System Abstract: This paper analyzes the effect of the introduction of performance-related funding i," Ruhr Economic Papers 0457, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Ehlers, Tim & Schwager, Robert, 2012. "Honest grading, grade inflation and reputation," Center for European, Governance and Economic Development Research Discussion Papers 143, University of Goettingen, Department of Economics.
  3. Ehlers, Tim & Schwager, Robert, 2012. "Honest Grading, Grade Inflation and Reputation," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62051, Verein für Socialpolitik / German Economic Association.

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