Stakes and Signals: An Empirical Investigation of Muddled Information in Standardized Testing

Germán Reyes, Evan Riehl and Ruqing Xu

No 32608, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine a natural experiment in Brazil in which similar students took the same standardized test as either a low-stakes school accountability exam or a high-stakes admission exam for the country's top universities. Using administrative data and a difference-in-differences design, we find that test score gaps between high- and low-income students expanded on the high-stakes exam, consistent with wealthy students engaging in test prep. Yet the increase in stakes made scores more informative for students' college outcomes. Thus the "muddling" of information on natural ability and test prep improved the quality of the score signal, although it also exacerbated inequality.

JEL-codes: I23 I24 J24 M5 (search for similar items in EconPapers)
Date: 2024-06
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