NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Long-term Consequences of Teacher Discretion in Grading of High-stakes Tests

Rebecca Diamond, Petra Persson

NBER Working Paper No. 22207
Issued in April 2016, Revised in June 2016
NBER Program(s):Economics of Education, Labor Studies, Public Economics

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 immigrant 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.

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Document Object Identifier (DOI): 10.3386/w22207

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