Jacob Richard Bøggild Strabo, Department of Economics (UCPH)

"Grading Schemes and the Allocation of Talent"

Abstract

In this paper, we investigate how different grading systems affect the efficient allocation of talent to college programs and, consequently, professions. In many countries, high school GPA is the single most important metric when ranking and ultimately admitting applicants to colleges and specific study programs. Despite this, there are significant differences both across countries and over time in how this metric is calculated, including which grading scale is used and how each course is weighted. We hypothesize that different grading policies will lead to the admission of different types of students, ultimately impacting the utilization of skills in society. We formulate a theoretical model of self-selection into study programs with a capacity limit on one of the programs, where slots are allocated to individuals with the highest GPAs. We find that an increase in the weight of skills relevant to a specific study program in the GPA calculation not only enhances the realized skills and abilities in that profession but also improves the realized skills and abilities in other professions. Next, we generalize our model and conduct rigorous simulations to assess how different grading policies and admission systems used around the world affect the utilization of talent in society. In particular, we demonstrate that not only the weights assigned to each course in the GPA calculation but also the numerical values associated with different marks in a grading system can significantly impact the match quality between study programs and applicants. Lastly, we intend to investigate the consequences of grade inflation on talent allocation.

Contact person: Egor Starkov