{"id":32,"date":"2025-05-01T14:02:18","date_gmt":"2025-05-01T18:02:18","guid":{"rendered":"https:\/\/people.bsu.edu\/econbriefs\/?p=32"},"modified":"2025-05-01T14:02:18","modified_gmt":"2025-05-01T18:02:18","slug":"a-for-effort-or-for-funding-by-dr-cecil-bohanon-and-dr-john-horowitz","status":"publish","type":"post","link":"https:\/\/people.bsu.edu\/econbriefs\/2025\/05\/01\/a-for-effort-or-for-funding-by-dr-cecil-bohanon-and-dr-john-horowitz\/","title":{"rendered":"A for Effort\u2014or for Funding? \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz"},"content":{"rendered":"

Perhaps the best bumper sticker for economics is: Incentives Matter. This insight is vital in thinking about behavior, including how for-profit and not-for-profit firms operate. Here is an example from our own backyard.<\/span>\u00a0<\/span><\/p>\n

From 1970 to 1990, university completion rates, defined as the percentage of entering university freshmen who attain a degree within a six-year time, declined. However, since 1990 the trend reversed, and completion rates have increased. <\/span>Our friend Kevin Mumford at Purdue and several colleagues recently published a paper in <\/span>American Economic Journal: Applied Economics <\/span><\/i>titled: \u201cWhy Have College Completion Rates Increased?\u201d They concluded the most likely reason is grade\u202finflation. In other words, colleges and universities now give higher\u202fgrades for the same quality of student work than they did in the early 90s.\u00a0<\/span>\u00a0<\/span><\/p>\n

They estimate that \u201cchanges in first-year GPA account for 95 percent of the change in graduation rates\u2026\u201d In one data set, freshmen students \u201c\u2026had lower pre-collegiate math percentiles…\u00a0 (but) (d)espite this decline in preparation, first-year college GPA increased from 2.44 to 2.65.\u201d\u00a0 They also report, \u201cThe first-year GPA for all students increases from 2.68 to 2.79\u2026.\u201d\u00a0 Students are getting higher\u202fgrades while working more hours at paid jobs and studying fewer hours for their classes. At one school that had given the same test over many years, students were getting lower test scores while being awarded higher\u202fgrades.<\/span>\u00a0<\/span><\/p>\n

What explains this relaxed grading? Incentives! The authors note that since the 1990\u2019s: <\/span>\u201c\u2026the number of state policies that tie appropriations for higher education to college completion via performance-based funding mechanisms has increased. \u2026 Increased attention to graduation and performance-based funding gives schools an incentive to increase graduation rates.\u201d\u00a0 They conclude: \u201cWhy did grade point averages increase from the 1990s to 2010? One likely candidate is the recent policy focus on college completion rates\u2026 Changing standards for degree receipt is a low-cost way to increase graduation rates.\u201d\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

Some may support higher grades for the same work because it helps more students graduate faster. On the other hand, others may feel that lower standards mean more students are graduating without the skills that a college degree is supposed to signal to the long-run detriment of the economy and society. We\u2019ll keep our focus on the effect of incentives and let the reader decide whether those effects are positive or negative for the students, employers, and the economy.\u00a0 We look forward to additional research and insights on the topic.\u00a0<\/span>\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Perhaps the best bumper sticker for economics is: Incentives Matter. This insight is vital in thinking about behavior, including how for-profit and not-for-profit firms operate. Here is an example from our own backyard.\u00a0 From 1970 to 1990, university completion rates, defined as the percentage of entering university freshmen who attain a degree within a six-year […]<\/p>\n","protected":false},"author":112,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[271],"tags":[278,147,273,282,280,279,284,281,272,276,274,286,277,285,283,275],"class_list":["post-32","post","type-post","status-publish","format-standard","hentry","category-education","tag-american-economic-journal-applied-economics","tag-economics","tag-for-profit","tag-freshmen-students","tag-gpa","tag-grade-inflation","tag-grades","tag-graduation-rates","tag-incentives","tag-kevin-mumford","tag-not-for-profit","tag-performance-based-funding","tag-purdue-university","tag-state-policies","tag-test-scores","tag-university-completion-rates"],"yoast_head":"\nA for Effort\u2014or for Funding? \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/people.bsu.edu\/econbriefs\/2025\/05\/01\/a-for-effort-or-for-funding-by-dr-cecil-bohanon-and-dr-john-horowitz\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A for Effort\u2014or for Funding? \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs\" \/>\n<meta property=\"og:description\" content=\"Perhaps the best bumper sticker for economics is: Incentives Matter. 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