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Honest grading, grade inflation and reputation

Author

Listed:
  • 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," University of Göttingen Working Papers in Economics 143, University of Goettingen, Department of Economics.
    • Handle: RePEc:zbw:cegedp:143
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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 of Labor Economics (IZA).
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    3. Popov, Sergey V. & Bernhardt, Dan, 2010. "University Competition, Grading Standards and Grade Inflation," MPRA Paper 26461, University Library of Munich, Germany.
    4. , & , & ,, 2008. "Credible ratings," Theoretical Economics, Econometric Society, vol. 3(3), September.
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    19. Wikstrom, Christina & Wikstrom, Magnus, 2005. "Grade inflation and school competition: an empirical analysis based on the Swedish upper secondary schools," Economics of Education Review, Elsevier, vol. 24(3), pages 309-322, June.
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    More about this item

    Keywords

    grading; signaling; reputation; education;
    All these keywords.

    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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