The World Uncertainty Index, co-created by SIEPR Senior Fellow Nicholas Bloom, is the broadest assessment tool yet to measure global uncertainty, which is now approaching a record high.
Grade inflation is a hot topic in education circles. An A was once a mark of distinction. Now, at many schools, it’s the new normal. What’s not clear though is what the effects of this practice might be. Is it a harmless boost to student self-esteem or does it unfairly tilt the education and employment playing fields to the advantage of those whose grades get inflated?
Petra Persson, an assistant professor of economics a faculty affiliate at the Stanford Institute for Economic Policy Research, has used the tools of economic analysis to examine this question in her home country of Sweden. In unpublished research conducted with Stanford Graduate School of Business economist Rebecca Diamond, also a former SIEPR postdoctoral scholar, Persson found that inflating grades when students were 16 had big effects in later life. Those whose grades got bumped up were more likely to complete high school and go to a university than students whose grades weren’t inflated, opening the way to higher income when they entered the job market.
“This is the first economic evidence of the long-term consequences of grade inflation,” says Persson, who earned her PhD from Columbia and specializes in public economics and social insurance. “We found a ripple effect throughout the educational career, putting inflated students on a different trajectory and potential earnings profile.”
In their study, Persson and Diamond exploited special features of Sweden’s educational system. In ninth grade, students take a series of standardized tests they must pass to qualify for high school. The researchers looked specifically at math results of more than 600,000 students who took the tests between 2004 and 2010. Tests were graded locally. Math results were based mostly on correct answers, but teachers could add points for subjective reasons, such as “clarity of expression.” In some districts, Persson and Diamond found no evidence of inflation, but in others they noticed discontinuities. For example, math scores in some places clustered just beyond the pass threshold, suggesting that teachers awarded extra points so students would get passing marks.
Being bumped up to a passing grade was no small thing. Statistical analysis showed that getting pushed above the pass threshold raised the likelihood of high school graduation by about 28 percentage points and ultimately led to higher-paying job opportunities. Moreover, pupils who completed high school because their test scores were graded up in ninth grade were more than twice as likely to have begun college five years later. The analysis also identified a possible motive for grade inflation—school competition. In Sweden, parents and kids choose their schools, which gives institutions in the most competitive districts incentive to raise student test scores. “These large differences in grade inflation undermine the equality of opportunity in Swedish schools,” says Persson. “Some pupils get bumped up a lot—with large long-term gains to follow—whereas others with the same ability, who simply happen to attend schools that grade less leniently, are left behind.”