Sorting and Grading

TL;DR

This paper develops a framework to determine optimal sorting and grading strategies in schools, considering heterogeneity in student ability and grading incentives, with implications for policy on tracking.

Contribution

It introduces a model for optimal school stratification and grading policies, highlighting the benefits of coarse stratification and differentiated grading incentives.

Findings

Optimal school systems favor coarse stratification.

More lenient grading is optimal at top-tier schools.

The framework informs policy debates on tracking.

Abstract

We propose a framework to assess how to optimally sort and grade students of heterogenous ability. Potential employers face uncertainty regarding an individual's productive value. Knowing which school an individual went to is useful for two reasons: firstly, average student ability may differ across schools; secondly, different schools may use different grading rules and thus provide varying incentives to exert effort. An optimal school system exhibits coarse stratification with respect to ability, and more lenient grading at the top-tier schools than at the bottom-tier schools. Our paper contributes to the ongoing policy debate on tracking in secondary schools.