Munich Personal RePEc Archive

Grade Inflation and Education Quality

Boleslavsky, Raphael and Cotton, Christopher (2012): Grade Inflation and Education Quality.

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Abstract

We consider a game in which schools compete to place graduates in two distinct ways: by investing in the quality of education, and by strategically designing grading policies. In equilibrium, schools issue grades that do not perfectly reveal graduate abilities. This leads evaluators to have less-accurate information when hiring or admitting graduates. However, compared to fully-revealing grading, strategic grading motivates greater investment in educating students, increasing average graduate ability. Allowing grade inflation and related grading strategies can increase the probability evaluators select high-ability graduates.

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