The Impacts of Grade Retention Policy With Minimal Retention

State laws that mandate in-grade retention for struggling readers are widespread in the U.S., covering 34% of public-school third graders in 2023-24. This study investigates the impacts of Michigan’s third-grade reading law on subsequent test scores and school progress outcomes for the 2020-21 and 2021-22 third-grade cohorts. Using a regression discontinuity (RD) design, we find that being flagged for retention raises students’ reading scores in the next school year by 0.045 standard deviations (SD)—a modest but meaningful impact. Because being flagged increases the likelihood of actually being retained by only 3.4 percentage points, the implied effect of retention itself under standard “fuzzy” RD assumptions would be an implausibly large 1.3 SD. This result suggests flagging may affect outcomes via mechanisms other than just retention, a violation of the exclusion restriction. Indeed, we estimate similar effects even in districts that retain no students. Survey evidence suggests flagged students receive more intensive reading support even if they are not retained. Our findings suggest retention may be a much less important component of literacy reforms than previously understood. Finally, given the similarity between Michigan’s reading law and those in other states, our findings raise concerns about potential bias in previously estimated retention effects.