The Long-Term Consequences of Teacher Discretion in Grading of High-Stakes Tests∗
The Long-term Consequences of Teacher Discretion in Grading of High-stakes Tests∗ Rebecca Diamond† Petra Persson‡ This Draft: October 2, 2017 First Draft: February 28, 2016 Abstract We examine the long-term consequences of teacher discretion in grading of high- stakes tests. Bunching in Swedish math test score distributions reveal that teachers inflate students who have “a bad test day,” but do not to discriminate based on im- migrant status or gender. By developing a new estimator, we show that receiving a higher grade leads to far-reaching educational and earnings benefits. Because grades do not directly raise human capital, these results emphasize that grades can signal to students and teachers within the educational system, and suggest important dynamic complementarities between students’ effort and their perception of their own ability. ∗A previous version of this paper was circulated under the title “The Long-term Consequences of Grade Inflation." We are grateful to Raj Chetty, John Friedman, Matt Gentzkow, Caroline Hoxby, Guido Imbens, Eddie Lazear, Paul Oyer, Luigi Pistaferri, Kathryn Shaw, Alan Sorensen, Chris Taber, and seminar and conference participants at Boston College, Brown, Cornell, Gothenburg, Houston, Michigan, the Minneapo- lis Fed, NYU, Oslo, Santa Clara, Stanford, UC Berkeley, UC Davis, UC San Diego, UC Santa Cruz, SIEPR, Stockholm, the Swedish Institute for Social Research, Uppsala, Wisconsin, Yale, the 2016 Applied Microe- conomics Jamboree at Duke, the 2015 All California Labor Conference at UCLA, the 2016 Utah Winter Business Economics Conference, and the 2015 Western Economic Association International for helpful com- ments. We are especially grateful to Bjorn Ockert, Jonas Vlachos, and Olof Aslund.
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