University Competition, Grading Standards and Grade Inflation
AbstractWe 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 26461.
Date of creation: 04 Nov 2010
Date of revision:
grading standards; grading inﬂation; information;
Other versions of this item:
- Sergey V. Popov & Dan Bernhardt, 2013. "University Competition, Grading Standards, And Grade Inflation," Economic Inquiry, Western Economic Association International, vol. 51(3), pages 1764-1778, 07.
- I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-13 (All new papers)
- NEP-EDU-2010-11-13 (Education)
- NEP-LAB-2010-11-13 (Labour Economics)
- NEP-SOG-2010-11-13 (Sociology of Economics)
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