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Honest Grading, Grade Inflation and Reputation

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  • Ehlers, Tim
  • Schwager, Robert

Abstract

When grades lose their informative value because the percentage of students receiving the best grade rises 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 paper, 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 signaling model of grading, we show that this mechanism reduces or even avoids grade inflation.

Suggested Citation

  • 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.
  • Handle: RePEc:zbw:vfsc12:62051
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    References listed on IDEAS

    as
    1. Martins, Pedro S., 2009. "Individual Teacher Incentives, Student Achievement and Grade Inflation," IZA Discussion Papers 4051, Institute for the Study of Labor (IZA).
    2. A. Tampieri, 2011. "Students' Social Origins and Targeted Grade Inflation," Working Papers wp801, Dipartimento Scienze Economiche, Universita' di Bologna.
    3. 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.
    4. Damiano, Ettore & Li, Hao & Suen, Wing, 2008. "Credible ratings," Theoretical Economics, Econometric Society, vol. 3(3), September.
    5. 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.
    6. Robertas Zubrickas, 2015. "Optimal Grading," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56, pages 751-776, August.
    7. Michael Ostrovsky & Michael Schwarz, 2010. "Information Disclosure and Unraveling in Matching Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 34-63, May.
    8. Lydia Mechtenberg, 2006. "Cheap Talk in the Classroom," SFB 649 Discussion Papers SFB649DP2006-019, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    9. 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.
    10. Bauer, Thomas K. & Grave, Barbara S., 2011. "Performance-related Funding of Universities: Does More Competition Lead to Grade Inflation?," IZA Discussion Papers 6073, Institute for the Study of Labor (IZA).
    11. Robertas Zubrickas, 2008. "Optimal Grading," Economics of Education Working Paper Series 0027, University of Zurich, Department of Business Administration (IBW).
    12. 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.
    13. Arthur Caplan & John Gilbert, 2010. "Can fighting grade inflation help the bottom line?," Applied Economics Letters, Taylor & Francis Journals, vol. 17(17), pages 1663-1667.
    14. Wayne A. Grove & Tim Wasserman, 2004. "The Life-Cycle Pattern of Collegiate GPA: Longitudinal Cohort Analysis and Grade Inflation," The Journal of Economic Education, Taylor & Francis Journals, vol. 35(2), pages 162-174, April.
    15. 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.
    16. Talia Bar & Vrinda Kadiyali & Asaf Zussman, 2009. "Grade Information and Grade Inflation: The Cornell Experiment," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 93-108, Summer.
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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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