Work experience, information revelation, and study effort

Firms screen graduates using grade thresholds, which can turn into students’ targeted learning outcomes or reference points in the model of study effort choice. Variability in the usage of grade thresholds implies students’ uncertainty about the value of grades. Work experience from internships can reduce this uncertainty and, in turn, affect the choice of study effort. We theoretically show that a reduction in uncertainty induces more effort from less able students but, in contrast, less effort from more able students. Consistent with the theory, we empirically find that students returning from year-long internships have a flatter grade-ability profile.