Applied Economics Letters
The on-going debate over grade inflation is focused on whether instructors have been too generous in awarding their students high grades over the past 25 years, inflating cumulative grade point averages (see Johnson, 2003, and Kohn, 2004). The debate has left unanswered two interrelated questions. Should we truncate the grade distribution's upper end (as Princeton is doing) or adjust the mean grade toward the distribution's lower end (which would shift the entire distribution, resulting in fewer A’s and more F’s)? Assuming this latter type of ‘mean-shift grading policy’ is warranted, what would the effect be on an institution's revenues? To answer these questions, we develop a theoretical profitability benchmark (Section 2). We then use a rich set of student transcript data to estimate the four-year economic cost associated with non-implementation (Section 3). Section 4 concludes.
Caplan, Arthur J. and John Gilbert (2010) “Can Fighting Grade Inflation Help the Bottom Line?” Applied Economics Letters, 17(17), 1663-1667.