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May 2, 2018

Cluster-Seminar Public Finances and Living Conditions

Teacher incentives and grade retention


May 2, 2018
12:30 - 13:30


DIW Berlin im Quartier 110
Room 5.2.010
Mohrenstraße 58
10117 Berlin


Maximilian Bach

This paper provides a simple framework to test whether teachers strategically retain students in the first grade of primary school in order to minimize the number of students in their class for grades 2-4. I build a model in which classes are subject to a class size cap and teachers can choose to retain students if their performance falls below an academic threshold. The key prediction, borne out in administrative data for the German state Sachsen, is that grade retention rates increase monotonically with class size but drop sharply in the vicinity of the class-size cap because teachers expect that classes might be split if class size exceeds the class size cap in the next grade.