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In 2002, Florida adopted a test-based promotion policy in the third grade in an attempt to end social promotion. Similar policies are currently operating in Texas, New York City, and Chicago and affect at least 17 percent of public school students nationwide. Using individual-level data on the universe of public school students in Florida, we analyze the impact of grade retention on student proficiency in reading one and two years after the retention decision. We use an instrumental variable (IV) approach made available by the relatively objective nature of Florida's policy. Our findings suggest that retained students slightly outperformed socially promoted students in reading in the first year after retention, and these gains increased substantially in the second year. Results were robust across two distinct IV comparisons: an across-year approach comparing students who were essentially separated by the year in which they happened to have been born, and a regression discontinuity design.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. We exploit a discontinuity in the probability of third grade retention under Florida's test-based promotion policy to study the causal effect of retention on student outcomes over time.Although conventional OLS estimates suggest negative effects of retention on achievement, regression discontinuity estimates indicate large positive effects on achievement and a reduced probability of retention in subsequent years. The achievement gains from test-based retention fade out over time, however, and are statistically insignificant after six years.JEL Classification: H52, I21, I28