The Hanging Sword of Damocles: Incentive Effects of Grade Retention on Academic Performance

• In Event: Retention’s Reach: Incentive and Peer Effects Beyond the Gate Grade

Abstract

Grade retention is widely used as a policy tool to improve the test scores of low-achieving students. Proponents argue two main mechanisms by which test-based grade retention policies can improve the learning outcomes of low-performing students. First, students who are retained may improve their learning during their repeated grade, enabling them to “catch up” to their higher-performing peers. Second, students who are relatively low-performing may improve their learning in an effort to avoid being retained at all. However, prior literature overwhelmingly focuses on the first of these mechanisms, estimating the short-, medium-, and long-run effects of grade retention on retained students.

This paper provides new causal evidence on this second mechanism, which likely affects a larger student population than the first: how does the threat of grade retention affect student effort and learning outcomes, for both retained and non-retained students. We exploit a quasi-random variation generated by Texas’s fifth-grade retention policy, introduced in 2005, which mandates retention for students who fail standardized reading or math tests. Our triple difference strategy uses the following three comparisons: first, a within-cohort comparison of students near the retention cutoff who might be threatened by grade retention to those far away from the cutoff who are not. Second, a between-cohort comparison of students enrolled in fifth grade in 2004 compared to 2005, where the 2004 cohort is not subject to a grade retention policy. Third, a within-individual comparison of low-stakes fourth grade tests to fifth grade tests, which, combined with the prior two differences, allows us to isolate changes in effort and learning for the group incentivized by the grade retention policy – fifth graders in 2005 who were near the failing cutoff on their fourth grade tests in 2004. Using this triple difference strategy, we find strong evidence of a substantial incentive effect for students near the fourth-grade reading test passing cutoff, with weaker effects for math test scores.

Author

• Kendall Kennedy, Texas State University
  Presenting Author