Public expenditures,educational outcomes and grade inflation: Theory and evidence from a policy intervention in the Netherlands |
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| Institution: | 1. Anderson Graduate School of Management, UCLA & National Bureau of Economic Research, 110 Westwood Plaza, C502 Entrepreneurs Hall, Los Angeles, CA 90095-1481, USA;2. Universidad de Chile, Facultad de Economía y Negocios, Chile Diagonal Paraguay 257, Santiago, Chile\n;1. Top Institute for Evidence Based Education Research, Maastricht University, Kapoenstraat 2, 6200 MD Maastricht, The Netherlands;2. Leuven Economics of Education Research, University of Leuven (KU Leuven), Naamsestraat 69, Leuven B-3000, Belgium;3. Norwegian Business School (BI), Nydalsveien 37, Oslo N-0442, Norway;4. Department of Applied Economics (APEC), Vrije Universiteit Brussel, Pleinlaan 2, 1050 Brussel, Belgium;1. UC Berkeley, Department of Economics, United States;2. Department of Economics, Arizona State University, United States |
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| Abstract: | This article argues that resource expansion can fail to improve actual student performance because it might cause educators to soften grading standards (i.e., induce grade inflation). Our theoretical model shows that, depending on schools’ and students’ reactions to resource changes, the overall effect of resources on education outcomes is ambiguous. Schools, however, have an incentive to adjust their grading structure following resource shifts, such that grade inflation is likely to accompany resource-driven policies. Exploiting a quasi-experimental policy intervention in the Netherlands, we find that additional resources may indeed induce grade inflation, particularly when the resource increase is limited. |
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| Keywords: | Public expenditures Grade inflation Educational attainment Standardized central exam |
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