High-Stakes Grades and Student Behavior

High-stakes exams carry important consequences for the prospects of reaching university. This study examines whether the incentives associated with exam grades affect educational investments. Exploiting a reform-induced recoding of high school students' grade point averages, we identify the effect of highstakes grades on student behavior. The results show that students who were downgraded by the recoding performed better on subsequent assessments. The increase in academic performance in high school translated into an increased likelihood of university enrollment. As the recoding did not convey information about actual performance, these results emphasize that incentives are important in understanding students' educational investments.