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

Session Submission Type: Panel

Abstract

Grade retention policies—requiring students to repeat a grade if they fail to meet academic benchmarks—remain one of the most controversial tools in education policy. While a growing body of research has explored the short-term academic impacts of retention (Jacob & Lefgren, 2004; Schwerdt et al., 2017; Hwang & Koedel, 2023; Mumma & Winters, 2023; Martorell & Mariano, 2018), fewer studies have systematically examined the broader and longer-term consequences of these policies: their incentive effects, spillovers on peers, equity implications, and consequences for student trajectories across diverse contexts.

This panel brings together four studies that use rigorous causal designs to evaluate the broader consequences of grade retention policies in the United States and Chile. Together, the papers illuminate how retention policies function not just at the “gate grade,” but as system-wide accountability interventions with heterogeneous and dynamic impacts.

Cristina Riquelme examines Chile’s nationwide attendance-based promotion policy using a fuzzy regression discontinuity design. She finds that later-grade retention increases high school dropout, particularly for students from less-educated households, while early-grade retention has limited effects. Notably, among students who persist through secondary school, retention improves college exam performance—highlighting important trade-offs in long-run outcomes.

NaYoung Hwang and Cory Koedel focus on peer effects using Indiana’s third-grade retention policy. Leveraging a cohort-level regression discontinuity design, they find limited academic or attendance spillovers from peer retention, though disciplinary outcomes improve modestly in the short term for rising fourth graders.

Sarah Souders and Robert Bifulco use administrative data from Ohio to estimate the effects of the threat of retention in Grade 3. Comparing students just above and below the fall promotion cutoff, they find that the incentive effect of retention threat leads to significant gains in achievement and reductions in misbehavior through Grade 8. These effects are mediated through shifts in peer composition, teacher quality, and access to remedial or advanced coursework.

Finally, Kendall Kennedy and Jiee Zhong provide complementary evidence from Texas’s fifth-grade policy using a triple-difference design. They find that retention threat increases effort and test performance, particularly for students near the academic margin.

Together, these studies contribute to a growing literature on the broader impacts of educational accountability and retention policy (Hong & Hong, 2021; Battistin & Schizerotto, 2019; Roderick et al., 2002). They show that grade retention policies operate as more than isolated events—they shape incentives, peer environments, and long-term outcomes in complex and sometimes unintended ways. As policymakers debate the future of early literacy and promotion standards, these findings underscore the need for thoughtful policy design that accounts for both direct and indirect effects.

Policy Area

• Education

Chair

• Robert Bifulco

Discussant

• Umut Ozek, RAND Corporation

Organizer

• Sarah University - Maxwell Souders, American University

Individual Presentations

• Stakes that Stick: Persistent Effects of Retention Threat - Presenting Author: Sarah University - Maxwell Souders, American University

• The Impact of Peer Retention - Presenting Author: NaYoung Hwang, University of New Hampshire

• The Hanging Sword of Damocles: Incentive Effects of Grade Retention on Academic Performance - Presenting Author: Kendall Kennedy, Texas State University

• Beyond the Gate: The Effect of Grade Retention on Educational Trajectories - Presenting Author: Cristina Riquelme, Trinity University