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Performance-related Funding of Universities – Does more Competition Lead to Grade Inflation?

  • Thomas K. Bauer
  • Barbara S. Grave

    ()

German universities are regarded as being under-financed, inefficient, and performing below average if compared to universities in other European countries and the US. Starting in the 1990s, several German federal states implemented reforms to improve this situation. An important part of these reforms has been the introduction of indicator-based funding systems. These financing systems aimed at increasing the competition between universities by making their public funds dependent on their relative performance concerning different output measures, such as the share of students obtaining a degree or the amount of third party funds. This paper evaluates whether the indicator-based funding created unintended incentives, i.e. whether the reform caused a grade inflation. Estimating mean as well as quantile treatment effects, we cannot support the hypothesis that increased competition between universities causes grade inflation.

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File URL: http://repec.rwi-essen.de/files/REP_11_288.pdf
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Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0288.

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Length: 23 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:rwi:repape:0288
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  1. Jacob, Brian A., 2005. "Accountability, incentives and behavior: the impact of high-stakes testing in the Chicago Public Schools," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 761-796, June.
  2. Manuel Bagues & Mauro Sylos Labini & Natalia Zinovyeva, 2008. "Differential Grading Standards and University Funding: Evidence from Italy," Working Papers 2008-07, FEDEA.
  3. Burgess, Simon & Propper, Carol & Slater, Helen & Wilson, Deborah, 2005. "Who wins and who loses from school accountability? The distribution of educational gain in English secondary schools," CEPR Discussion Papers 5248, C.E.P.R. Discussion Papers.
  4. Krautmann, Anthony C. & Sander, William, 1999. "Grades and student evaluations of teachers," Economics of Education Review, Elsevier, vol. 18(1), pages 59-63, February.
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