Academic journal article Economic Inquiry

Real Costs of Nominal Grade Inflation? New Evidence from Student Course Evaluations

Academic journal article Economic Inquiry

Real Costs of Nominal Grade Inflation? New Evidence from Student Course Evaluations

Article excerpt


A substantial rise over time in grade point averages (GPAs) at colleges in the United States has been documented, debated, lamented, and theorized about, but empirical evidence on effects of grade inflation has been sparse and theoretical predictions have been ambiguous. Recent research documents a large drop over time in study times at U.S. colleges. This decline occurred over the same period as the rise in GPAs. The time trends suggest a causal link between grades and human capital investment. Confounding influences, though, include the changing composition of the college-going population and unobserved changes in the postsecondary institutions they attended. Given growing alarm among educators about low levels of student effort and engagement in college, evidenced by a spate of well-publicized books, (1) the answer is worth knowing: Do nominal changes in grading patterns translate into real changes in human capital investment?

The macro findings motivate an investigation at the micro level. To investigate the mechanism at lower levels of aggregation, this paper uses evidence from a 12-quarter panel of student course evaluations. Holding fixed instructor and course, classes in which students expect higher grades are found to be classes in which students study significantly less. Results indicate that average study time would be about 50% lower in a class in which the average expected grade was an "A" than in the same course taught by the same instructor in which students expected a "C." Simultaneity would suggest that this estimate of effort decline, if anything, is biased toward 0. Findings do not appear to be driven primarily by the individual student's expected grade, but by the average expected grade of others in the class. Class-specific factors, then, that generate low expected grades appear to produce higher effort choices, evidence that nominal changes in grades may lead to real changes in effort investment.

The remainder of the paper is organized as follows: Section II reviews the literature and fleshes out the motivation, Section III describes the empirical strategy and presents main empirical results, Section IV discusses the results in a broader context, Section V concludes.


A. Grade Inflation

Evidence of college grades increasing over time comes from a number of sources. Using data on self-reported GPAs, Kuh and Hu (1999) find that average grades increased for all types of postsecondary institutions between the 1980s and 1990s, with the largest increases observed at research universities. For a modest sample of colleges, information about grades has been made publicly available by the institution, obviating the need for self-reports. These data also show average GPAs rising in the 1960s, flattening somewhat in the 1970s, and rising from the 1980s to the 2000s, most steeply for highly selective colleges. (2) At Harvard, for example, about 49% of grades awarded in 2001 were A's, whereas in 1985 the fraction of A's was less than a third. (3) Adelman (1996), using institutional data from nationally representative data sets, (4) finds average grades rising between the 1980s and the 1990s (though not between the 1970s and 1980s). The National Postsecondary Student Aid Study (NPSAS) shows GPAs for full-time students rising from 2.83 to 2.97 between 1993 and 2004, with clear upward changes in GPA observed for all types of colleges. Given earlier work and recent NPSAS data, it would appear that average GPAs rose between the 1960s and 2004, except for a flat spell during the 1970s, with the increase amounting to about. 15 points per decade. (5)

B. Grade Compression

Do rising GPAs mean anything in real terms? The term "grade inflation" may be an imperfect analogy. Rising grades differ from rising nominal prices because inflated grades compress the grade distribution and may be less informative signals of ability. …

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