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Honest Grading, Grade Inflation, and Reputation

Author

Listed:
  • Tim Ehlers
  • Robert Schwager

Abstract

When students receive better grades without any corresponding increase in ability, this is called grade inflation. Conventional wisdom says that such grade inflation is unavoidable since it is essentially costless to award good grades. In this article, we point out an effect driving into the opposite direction: Grade inflation is not actually costless, since it has an impact on future cohorts of graduates, or, put differently, by grading honestly, a school can build up reputation. Introducing a concern for reputation into an established signalling model of grading, we show that this mechanism reduces or even avoids grade inflation. (JEL codes: I21, I23, and D82)

Suggested Citation

  • Tim Ehlers & Robert Schwager, 2016. "Honest Grading, Grade Inflation, and Reputation," CESifo Economic Studies, CESifo Group, vol. 62(3), pages 506-521.
    • Handle: RePEc:oup:cesifo:v:62:y:2016:i:3:p:506-521.
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifv022
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    References listed on IDEAS

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    1. Costrell, Robert M, 1994. "A Simple Model of Educational Standards," American Economic Review, American Economic Association, vol. 84(4), pages 956-971, September.
    2. , & , & ,, 2008. "Credible ratings," Theoretical Economics, Econometric Society, vol. 3(3), September.
    3. Martins, Pedro S., 2009. "Individual Teacher Incentives, Student Achievement and Grade Inflation," IZA Discussion Papers 4051, Institute of Labor Economics (IZA).
    4. Bauer, Thomas K. & Grave, Barbara S., 2011. "Performance-related Funding of Universities: Does More Competition Lead to Grade Inflation?," IZA Discussion Papers 6073, Institute of Labor Economics (IZA).
    5. Betts, Julian R, 1998. "The Impact of Educational Standards on the Level and Distribution of Earnings," American Economic Review, American Economic Association, vol. 88(1), pages 266-275, March.
    6. Thomas K. Bauer & Barbara S. Grave, 2011. "Performance-related Funding of Universities – Does more Competition Lead to Grade Inflation?," Ruhr Economic Papers 0288, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    7. repec:zbw:rwirep:0288 is not listed on IDEAS
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    Cited by:

    1. Chadi, Adrian & de Pinto, Marco & Schultze, Gabriel, 2019. "Young, gifted and lazy? The role of ability and labor market prospects in student effort decisions," Economics of Education Review, Elsevier, vol. 72(C), pages 66-79.
    2. Gabriele Lombardi & Giulio Ghellini, 2019. "Linking University Harshness and Students’ Choices: Sociodemographic Differences based on Italian Universities’ Characteristics," Department of Economics University of Siena 805, Department of Economics, University of Siena.

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    More about this item

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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