Grade Inflation, Social Background, and Labour Market Matching

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp08070.pdf Non-Technical SummaryThe results a student obtains in examinations at the end of school to a large extent determine her future labour market or academic career. Because of this importance, and since students from disadvantaged ethnical or social backgrounds typically fare worse in formal tests of academic achievement, some observers argue against tough testing and grading policies so as not to expose the disadvantage of such students to employers and/or further education institutions.Addressing this debate, the present paper examines the relationship between grades, social origin, and the labour market. It provides a game theoretic model describing the matching of workers of different abilities to different jobs. The role of grades in this context is to inform employers about the ability of workers. The paper shows that, if grades honestly reveal abilities, in equilibrium the most able workers are matched to the most demanding jobs. Moreover, compared to applicants with a mediocre grade, applicants with a good grade obtain a wage premium which reflects the productivity differential and the relative scarcity of workers with differering abilities. If, however, the school inflates grades by awarding good grades to some low ability students, then the matching of jobs and workers is not only determined by ability but also by social background: The best jobs are then reserved to highly graded students originating from the upper social classes. In addition, these students are paid an additional wage premium which students from lower social classes with a good grade do not obtain. These results arise from the fact that grade inflation reduces the informational content of grades, thereby inducing employers to use an unfavourable background as an additional signal for low ability.In further results, it is examined how this effect determines the preferences for grading policies in the student population. It is shown that the aggregate wage sum received by workers from the disadvantaged social class strictly decreases if grades are inflated. Moreover, high ability students from the favoured social origin, whom one might call the "elite", may indeed prefer grade inflation to honest grading. This may be worthwhile since with inflated grades, able students from disadvantaged backgrounds cannot signal their ability anymore, and so can compete less successfully for the most attract...

Students’ Social Origins and Targeted Grading

“…To interpret the equilibrium salaries, note that the salary level is negatively related to grade inflation, as it lowers the expected productivity. This is consistent with the existing literature on grade inflation: as in Chan, Hao, and Suen (2007) and Schwager (2012), the presence of grade inflation hinders high-achievers in terms of salary. A quick check shows that (1 + ) − 1 > 0 for > .…”

“…A firm's hiring choice is made by observing the students' final grade and social background. The public knowledge of social background seems plausible: in the real world, a personnel manager can probably tell the job candidate's social background through some information such as ethnic origins, name, address, language style, manners, clothing, and so on (Schwager 2012;Himmler and Schwager 2013). The knowledge of social background is also consistent with the advent of social networks and their potential use to acquire personal information.…”

Honest Grading, Grade Inflation and Reputation

“…Thus, Wongsurawat (2009) shows that U.S. law schools in their admission procedures increasingly rely on standardized test scores rather than on college grades. If average ability differs among social classes, employers react to grade inflation by downgrading the degree of graduates from disadvantaged backgrounds (Schwager, 2012) or by hiring only those with personal links to the employer (Tampieri, 2011). Finally, Caplan and Gilbert (2010) point out that grade inflation also has financial consequences for the school itself since students who have to repeat courses pay more tuition.…”

Applying grade inflation adjustment mechanism in an Ethiopian university: Differences in nominal and real grades

“…Currently, grade inflation is recognized as a threatening problem for higher education quality and student learning outcomes assessment (Felton & Koper, 2005;Hong & Zimmer, 2016;Schwager, 2012;Witte, & Geys, & Solondz, 2014). While Geisinger (2012) argued that grade inflation reflects a decline in academic standards, he supported his statement by reporting that since in the previous fifteen years, student scholastic aptitude had fallen even as student grades had risen.…”