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Are easy grading practices induced by low demand? Evidence from Italy

  • Maria, De Paola

In this paper we investigate whether grades are used by educational institutions as a competition variable to attract and retain students. Using a sample of almost 26,000 students enrolled at an Italian University, we document that grades vary significantly across degrees. After controlling for students’ characteristics, class-size, classmates’ quality and degree fixed effects, it emerges that students obtain better grades and are less likely to drop-out when their degree course experiences an excess of supply. We adopt an instrumental variable strategy to account for endogeneity problems and instrument the excess of supply by using the total number of universities offering each degree course. Our IV estimates confirm that the teaching staff on degree course facing low demand tend to set lower academic standards with the result that their students obtain better grades and have a lower probability of dropping out than they might otherwise.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14425.

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Date of creation: 06 Apr 2008
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Handle: RePEc:pra:mprapa:14425
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  1. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
  2. Paul M. Anglin & Ronald Meng, 2000. "Evidence on Grades and Grade Inflation at Ontario's Universities," Canadian Public Policy, University of Toronto Press, vol. 26(3), pages 361-368, September.
  3. Massimiliano BRATTI & Stefano STAFFOLANI, 2001. "Performance accademica e scelta della facolta' universitaria: aspetti teorici e evidenza empirica," Working Papers 152, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  4. Donald G. Freeman, 1999. "Grade Divergence as a Market Outcome," The Journal of Economic Education, Taylor & Francis Journals, vol. 30(4), pages 344-351, December.
  5. William Chan & Li Hao & Wing Suen, 2007. "A Signaling Theory Of Grade Inflation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 1065-1090, 08.
  6. David J. Zimmerman, 2003. "Peer Effects in Academic Outcomes: Evidence from a Natural Experiment," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 9-23, February.
  7. David N. Figlio & Maurice E. Lucas, 2000. "Do High Grading Standards Affect Student Performance?," NBER Working Papers 7985, National Bureau of Economic Research, Inc.
  8. Joshua Angrist & Alan B. Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," NBER Working Papers 8456, National Bureau of Economic Research, Inc.
  9. Bruce Sacerdote, 2001. "Peer Effects with Random Assignment: Results for Dartmouth Roommates," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 681-704.
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