The long-term effects of automatic grade promotion on child development

Grade retention is a common practice in many countries despite the fact that the evidence for its influence on child development is mixed. In 2006, China introduced a new rule that explicitly prohibited grade repetition during the compulsory education period. Exploiting the staggered introduction of this policy across provinces and applying a flexible difference-in-differences strategy, we analyze the causal effects of the reform on various student outcomes, including school completion and cognitive skills, mental health and self-confidence in early adulthood. The results indicate that automatic grade promotion hurts students' educational development, especially for boys and for children with less-educated mothers. On the other hand, however, the reform indeed improved mental health, as noted by the proponents of social promotion. More importantly, we find that all the policy impacts are concentrated solely among students exposed to the reform in an early grade, particularly 1st-3rd grade. The results further indicate that removing the “threat” of grade retention results in a decrease in study time in the long run, which we interpret as a potential mechanism.