Grades and Assessments - The Economists' Perspective, with Ron Diris, Fanny Landaud and Hans H. Sievertsen, forthcoming in ``Bradley and Green, The Economics of Education, 3rd edition''
This chapter reviews the economic literature on grading and assessment, focusing on how institutional design affects behavior and long-run outcomes. Grades and assessments serve as both informational devices and incentive mechanisms, shaping the decisions and beliefs of students, parents, teachers, and employers. We examine how key design choices---including who conducts assessments, the stakes attached to results, the coarseness of grading scales, and the format of performance feedback---generate trade-offs between informational accuracy, incentive provision, and equity. The evidence shows that seemingly minor institutional features, such as score thresholds, retake rules, and relative performance feedback, can substantially alter educational trajectories and labor market outcomes. Teacher-based assessments and standardized tests differ systematically in what they measure and whom they favor, with direct implications for sorting efficiency and inequality. We conclude by identifying promising directions for future research, including the welfare effects of alternative grading regimes, the rising importance of non-cognitive skills, and questions raised by AI-based assessment technologies.
The Value of a Peer, with Ulf Zölitz, reject & resubmit at Journal of Political Economy (resubmitted)
This paper introduces peer value-added, a new approach to quantify the total contribution of an individual peer to student performance. Peer value-added captures social spillovers irrespective of whether they are generated by observable or unobservable peer characteristics. Using data with repeated random assignment to university sections, we find that students significantly differ in their peer value-added. Peer value-added is a good out-of-sample predictor of performance spillovers in newly-assigned student-peer pairs. Nonetheless, students’ own past performance and other observable characteristics are poor predictors of peer value-added. Peer value-added increases after exposure to better peers and valuable peers are substitutes for low-quality teachers.
On the Extent, Correlates, and Consequences of Reporting Bias in Survey Wages, with Marco Caliendo, Katrin Huber and Jakob Wegmann, revise & resubmit at Journal of Labor Economics
Surveys are an indispensable source of data for applied economic research; however, their reliance on self-reported information can introduce bias, especially if core variables such as personal income are misreported. To assess the extent and impact of this misreporting bias, we compare self-reported wages from the German Socio-Economic Panel (SOEP) with administrative wages from social security records (IEB) for the same individuals. Using a novel and unique data linkage (SOEP-ADIAB), we identify a modest but economically significant reporting bias, with SOEP respondents underreporting their administrative wages by about 7.3%. This misreporting varies systematically with individual, household, and especially job and firm characteristics. In replicating common empirical analyses in which wages serve as either dependent or independent variables, we find that misreporting is consequential for some, but not all estimated relationships. It turns out to be inconsequential for examining the returns to education, but relevant for analyzing the gender wage gap. In addition, we find that misreporting bias can significantly affect the results when wage is used as the independent variable. Specifically, estimates of the wage-satisfaction relationship are substantially overestimated when based on survey data, although this bias is mitigated when focusing on interpersonal changes. Our findings underscore that survey-based measures of individual wages can significantly bias commonly estimated empirical relationships. They also demonstrate the enormous research potential of linked administrative-survey data.
Feedback, Confidence and Job Search Behavior, with Lukas Hensel, Jonas Radbruch, Marc Witte and Tsegay Tekleselassie, submitted, pre-registered at AEA RCT registry (AEARCTR-0009698)
Job seekers face uncertainty about their abilities, and whether these match with job requirements. Such uncertainty may result in sub-optimal job search outcomes and job matches. We conduct a field experiment among job seekers in Addis Ababa, Ethiopia. Participants underwent a skill assessment and were asked about their willingness to pay (WTP) for information about their relative performance on a test of general intelligence. WTP is positive for about 80 percent of the population, and is associated with gender and personality. Feedback provision leads individuals to update their beliefs which only persists for individuals with low WTP. We provide evidence that suggests imperfect recall as potential mechanism for the lack of persistence. Feedback increases job search intensity but relatively lower for initially overconfident individuals and those with negative or zero WTP, which results in lower realized wages for these groups. The heterogeneity in belief updating, recall and job search behavior is consistent with some overconfident job seekers being unable to forget information and, thus, to maintain motivated beliefs, but being sophisticated about this inability to forget.
