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University Competition, Grading Standards and Grade Inflation

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  • Popov, Sergey V.
  • Bernhardt, Dan

Abstract

We 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.

Suggested Citation

  • Popov, Sergey V. & Bernhardt, Dan, 2010. "University Competition, Grading Standards and Grade Inflation," MPRA Paper 26461, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:26461
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    File URL: https://mpra.ub.uni-muenchen.de/26461/1/MPRA_paper_26461.pdf
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    10. MacLeod, Bentley, 2009. "Anti-Lemons: School Reputation and Educational Quality," Department of Economics, Working Paper Series qt3rc708kd, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    11. Manuel Bagues & Mauro Sylos Labini & Natalia Zinovyeva, 2008. "Differential Grading Standards and University Funding: Evidence from Italy," CESifo Economic Studies, CESifo, vol. 54(2), pages 149-176.
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    Cited by:

    1. repec:spr:scient:v:115:y:2018:i:1:d:10.1007_s11192-018-2666-1 is not listed on IDEAS
    2. 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.
    3. Robert Schwager, 2018. "Majority Vote on Educational Standards," CESifo Working Paper Series 6845, CESifo Group Munich.
    4. repec:got:cegedp:143 is not listed on IDEAS
    5. Schwager, Robert, 2013. "Majority Vote on Educational Standards," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79971, Verein für Socialpolitik / German Economic Association.
    6. repec:bla:manchs:v:85:y:2017:i:1:p:106-131 is not listed on IDEAS
    7. 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.
    8. Maria Mercedes Teijeiro Álvarez (ed.), 2013. "Investigaciones de Economía de la Educación," E-books Investigaciones de Economía de la Educación, Asociación de Economía de la Educación, edition 1, volume 8, number 08, July-Dece.
    9. Manuel Salas Velasco, 2011. "More than just good grades: candidates’ perceptions about the skills and attributes employers seek in new graduates," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 13(3), pages 499-517, June.

    More about this item

    Keywords

    grading standards; grading inflation; information;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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