University Competition, Grading Standards, and Grade Inflation

Sergey V. Popov*, Dan Bernhardt

*Corresponding author for this work

Research output: Contribution to journalArticle

15 Citations (Scopus)

Abstract

We develop a model of strategic grade determination by universities distinguished by their distributions of student academic abilities. Universities choose grading standards to maximize the total wages of graduates, taking into account how the grading standards affect firms' productivity assessment and job placement. We identify conditions under which better universities set lower grading standards, exploiting the fact that firms cannot distinguish between good and badA''s. In contrast, a social planner sets stricter standards at better universities. We show how increases in skilled jobs drive grade inflation, and determine when grading standards fall faster at better schools. (JEL I21)

Original languageEnglish
Pages (from-to)1764-1778
Number of pages15
JournalEconomic Inquiry
Volume51
Issue number3
Early online date02 Dec 2012
DOIs
Publication statusPublished - Jul 2013

Keywords

  • grading standards
  • grading inflation
  • information

Cite this

Popov, Sergey V. ; Bernhardt, Dan. / University Competition, Grading Standards, and Grade Inflation. In: Economic Inquiry. 2013 ; Vol. 51, No. 3. pp. 1764-1778.
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University Competition, Grading Standards, and Grade Inflation. / Popov, Sergey V.; Bernhardt, Dan.

In: Economic Inquiry, Vol. 51, No. 3, 07.2013, p. 1764-1778.

Research output: Contribution to journalArticle

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AB - We develop a model of strategic grade determination by universities distinguished by their distributions of student academic abilities. Universities choose grading standards to maximize the total wages of graduates, taking into account how the grading standards affect firms' productivity assessment and job placement. We identify conditions under which better universities set lower grading standards, exploiting the fact that firms cannot distinguish between good and badA''s. In contrast, a social planner sets stricter standards at better universities. We show how increases in skilled jobs drive grade inflation, and determine when grading standards fall faster at better schools. (JEL I21)

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KW - grading inflation

KW - information

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DO - 10.1111/j.1465-7295.2012.00491.x

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