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Optimal grading

Robertas Zubrickas ()

No 487, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: Assuming that teachers are concerned with human capital formation and students - with ability signaling, in this paper we model a teacher-student relationship as an agency problem with conflicting interests. In our model, the teacher elicits effort from the student rewarding for it with a grade, the utility of which to the student is an ability signal inferred by the job market. In the event that the job market does not observe individual teachers' grading practice, teachers find grades as costless rewards and optimally choose to be lenient in grading. As a result, 'the problem of the commons' of good grades emerges leading to the depreciation of grading standards and grade inflation. The prediction of the model that the lower the expectations the teacher holds about her students' abilities, the flatter the grading rules she sets up is empirically supported.

Keywords: Principal-agent model; teacher-student relationship; costless rewards; grading rules; mismatch of abilities and grades; grade inflation; teacher incentives (search for similar items in EconPapers)
JEL-codes: C70 D82 D86 I20 (search for similar items in EconPapers)
Date: 2010-05
New Economics Papers: this item is included in nep-cta, nep-edu, nep-lab and nep-ure
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