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Stakes and Signals: An Empirical Investigation of Muddled Information in Standardized Testing

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  • Germán J. Reyes
  • Evan Riehl
  • Ruqing Xu

Abstract

We examine a natural experiment in Brazil in which similar students took the same standardized test as either a low-stakes school accountability exam or a high-stakes admission exam for the country's top universities. Using administrative data and a difference-in-differences design, we find that test score gaps between high- and low-income students expanded on the high-stakes exam, consistent with wealthy students engaging in test prep. Yet the increase in stakes made scores more informative for students' college outcomes. Thus the "muddling" of information on natural ability and test prep improved the quality of the score signal, although it also exacerbated inequality.

Suggested Citation

  • Germán J. Reyes & Evan Riehl & Ruqing Xu, 2024. "Stakes and Signals: An Empirical Investigation of Muddled Information in Standardized Testing," NBER Working Papers 32608, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32608
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    More about this item

    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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