IDEAS home Printed from https://ideas.repec.org/p/tor/tecipa/tecipa-222.html
   My bibliography  Save this paper

A Signaling Theory of Grade Inflation

Author

Listed:
  • William Chan
  • Hao Li
  • Wing Suen

Abstract

When employers cannot tell whether a school truly has many good students or just gives easy grades, schools have an incentive to inflate grades to help mediocre students, despite concerns about preserving the value of good grades for good students. We construct a signaling model where grades are inflated in equilibrium. The inability to commit to an honest grading policy reduces the informativeness of grades and hurts schools. Grade inflation by one school makes it easier for another school to fool the market with inflated grades. Easy grades are strategic complements, providing a channel to make grade exaggeration contagious.

Suggested Citation

  • William Chan & Hao Li & Wing Suen, 2005. "A Signaling Theory of Grade Inflation," Working Papers tecipa-222, University of Toronto, Department of Economics.
  • Handle: RePEc:tor:tecipa:tecipa-222
    as

    Download full text from publisher

    File URL: https://www.economics.utoronto.ca/public/workingPapers/Schwarz.pdf
    File Function: Main Text
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brown, Gardner & Layton, David F., 1996. "Resistance economics: social cost and the evolution of antibiotic resistance," Environment and Development Economics, Cambridge University Press, vol. 1(03), pages 349-355, July.
    2. Scott Barrett, 2003. "Global Disease Eradication," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 591-600, 04/05.
    3. Barrett, Scott & Hoel, Michael, 2007. "Optimal disease eradication," Environment and Development Economics, Cambridge University Press, vol. 12(05), pages 627-652, October.
    4. Philipson, Tomas, 2000. "Economic epidemiology and infectious diseases," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 33, pages 1761-1799 Elsevier.
    5. Francis, Peter J., 1997. "Dynamic epidemiology and the market for vaccinations," Journal of Public Economics, Elsevier, vol. 63(3), pages 383-406, February.
    6. Goldman Steven Marc & Lightwood James, 2002. "Cost Optimization in the SIS Model of Infectious Disease with Treatment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-24, April.
    7. Alistair Munro, 1997. "Economics and biological evolution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 9(4), pages 429-449, June.
    8. Mark Gersovitz & Jeffrey S. Hammer, 2004. "The Economical Control of Infectious Diseases," Economic Journal, Royal Economic Society, vol. 114(492), pages 1-27, January.
    9. Daily, Gretchen C. & Ehrlich, Paul R., 1996. "Impacts of development and global change on the epidemiological environment," Environment and Development Economics, Cambridge University Press, vol. 1(03), pages 311-346, July.
    10. Gersovitz, Mark & Hammer, Jeffrey S., 2005. "Tax/subsidy policies toward vector-borne infectious diseases," Journal of Public Economics, Elsevier, vol. 89(4), pages 647-674, April.
    11. John B. Horowitz & H. Brian Moehring, 2004. "How property rights and patents affect antibiotic resistance," Health Economics, John Wiley & Sons, Ltd., vol. 13(6), pages 575-583.
    12. Stephen P. A. Brown & William C. Gruben, 1997. "Intellectual property rights and product effectiveness," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 15-20.
    13. Geoffard, Pierre-Yves & Philipson, Tomas, 1997. "Disease Eradication: Private versus Public Vaccination," American Economic Review, American Economic Association, vol. 87(1), pages 222-230, March.
    14. Mark Gersovitz & Jeffrey S. Hammer, 2003. "Infectious Diseases, Public Policy, and the Marriage of Economics and Epidemiology," World Bank Research Observer, World Bank Group, vol. 18(2), pages 129-157.
    15. Kessing, Sebastian G. & Nuscheler, Robert, 2006. "Monopoly pricing with negative network effects: The case of vaccines," European Economic Review, Elsevier, vol. 50(4), pages 1061-1069, May.
    16. Brito, Dagobert L. & Sheshinski, Eytan & Intriligator, Michael D., 1991. "Externalities and compulsary vaccinations," Journal of Public Economics, Elsevier, vol. 45(1), pages 69-90, June.
    17. Baumol, William J., 1996. "Antibiotics overuse and other threats," Environment and Development Economics, Cambridge University Press, vol. 1(03), pages 346-349, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sergey V. Popov & Dan Bernhardt, 2013. "University Competition, Grading Standards, And Grade Inflation," Economic Inquiry, Western Economic Association International, vol. 51(3), pages 1764-1778, July.
    2. Alessandro Tampieri, 2016. "Social background effects on school and job opportunities," Education Economics, Taylor & Francis Journals, vol. 24(5), pages 496-510, September.
    3. Contreras, Dante & Gallegos, Sebastian & Meneses, Francisco, 2009. "Determinantes del desempeño universitario: ¿Importa la habilidad relativa?
      [University performance determinants: does relative ability matter?]
      ," MPRA Paper 23320, University Library of Munich, Germany.
    4. Rebecca Summary & William Weber, 2012. "Grade inflation or productivity growth? An analysis of changing grade distributions at a regional university," Journal of Productivity Analysis, Springer, vol. 38(1), pages 95-107, August.
    5. Maria De Paola, 2011. "Easy grading practices and supply–demand factors: evidence from Italy," Empirical Economics, Springer, vol. 41(2), pages 227-246, October.
    6. Babcock, Phillip, 2009. "Real Costs of Nominal Grade Inflation? New Evidence from Student Course Evaluations," University of California at Santa Barbara, Economics Working Paper Series qt4823c3jx, Department of Economics, UC Santa Barbara.
    7. Philip Babcock, 2010. "Real Costs Of Nominal Grade Inflation? New Evidence From Student Course Evaluations," Economic Inquiry, Western Economic Association International, vol. 48(4), pages 983-996, October.
    8. Chakraborty, Archishman & Harbaugh, Rick, 2007. "Comparative cheap talk," Journal of Economic Theory, Elsevier, vol. 132(1), pages 70-94, January.
      • Archishman Chakraborty & Rick Harbaugh, 2004. "Comparative Cheap Talk," Working Papers 2004-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    9. A. Tampieri, 2011. "Students' Social Origins and Targeted Grade Inflation," Working Papers wp801, Dipartimento Scienze Economiche, Universita' di Bologna.
    10. Hernández-Julián, Rey & Looney, Adam, 2016. "Measuring inflation in grades: An application of price indexing to undergraduate grades," Economics of Education Review, Elsevier, vol. 55(C), pages 220-232.
    11. Talia Bar & Vrinda Kadiyali & Asaf Zussman, 2012. "Putting Grades in Context," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 445-478.
    12. Maria, De Paola, 2008. "Are easy grading practices induced by low demand? Evidence from Italy," MPRA Paper 14425, University Library of Munich, Germany.
    13. Schwager, Robert, 2012. "Grade inflation, social background, and labour market matching," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 56-66.
    14. Damiano, Ettore & Li, Hao & Suen, Wing, 2008. "Credible ratings," Theoretical Economics, Econometric Society, vol. 3(3), September.
    15. Oliver Himmler & Robert Schwager, 2013. "Double Standards in Educational Standards – Do Schools with a Disadvantaged Student Body Grade More Leniently?," German Economic Review, Verein für Socialpolitik, vol. 14(2), pages 166-189, May.
    16. Rick Harbaugh & Eric Rasmusen, 2012. "Coarse Grades: Informing the Public by Withholding Information," Working Papers 2012-06, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    17. Gwendolyn R. Tecson, 2011. "Trends in Grades, UP School of Economics," UP School of Economics Discussion Papers 201102, University of the Philippines School of Economics.
    18. Cory Koedel, 2010. "Grading Standards in Education Departments at Universities," Working Papers 1002, Department of Economics, University of Missouri, revised 13 Jun 2011.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tor:tecipa:tecipa-222. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RePEc Maintainer). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.