Measuring grade inflation and grade divergence accounting for student quality

This study uses a rich longitudinal data-set of 13,202 full-time students belonging to 11 cohorts over 22 consecutive semesters (Fall 1995 to Spring 2006) to model the determinants of the grade inflation rates prevailing at the University of Puerto Rico at Bayamón. The following new interesting findings are reported: (1) Estimated rates vary significantly among and within the academic programs, implying grade divergence, depending on the time reference used: cohort time dummies or semesters since admission to the institution. (2) The rates are significantly related to the proportions of female students, students who switch from their original academic programs, and students from private schools. (3) Results suggest that, under determinate circumstances, average- and low-quality students consider higher grades as normal goods; conversely, high-quality students consider higher grades as inferior goods.