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A SIGNALING THEORY OF GRADE INFLATION *
Author(s) -
Chan William,
Hao Li,
Suen Wing
Publication year - 2007
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2007.00454.x
Subject(s) - commit , exaggeration , grade inflation , grading (engineering) , incentive , value (mathematics) , economics , inflation (cosmology) , psychology , construct (python library) , mathematics education , microeconomics , computer science , mathematics , higher education , engineering , statistics , programming language , civil engineering , physics , database , psychiatry , theoretical physics , economic growth
When employers cannot tell whether a school truly has many good students or just gives easy grades, a school has incentives to inflate grades to help its mediocre students, despite concerns about preserving the value of good grades for its good students. We construct a signaling model where grades are inflated in equilibrium. The inability to commit to an honest grading policy reduces the efficiency of job assignment and hurts a school. Grade inflation by one school makes it easier for another school to do likewise, thus providing a channel to make grade exaggeration contagious.