Working Paper Series,
Uppsala University, Department of Economics

Abstract: Grade retention is a widely used educational policy promoting human capital. However, its benefi ts and costs are still under debate. Retention may a ffect learning, cognitive and psychological capacities, educational attainment and the lifetime income (through the timing of entry to the labor market). This paper estimates the causal eff ects of grade retention on all these outcomes exploiting a retention rule based on the school GPA that enables a regression discontinuity design. I use administrative data from a 15-years panel on the universe of students in the educational system in Chile. The fi ndings are fourfold. First, (marginally) retained students achieve the same amount of education than (marginally) promoted (i.e., high school graduation, higher education enrollment, etc.). Second, they improve their cognitive ability (measured by test scores) in the short and the long run. Third, induces parents to increase parental time investments and expectations. Fourth,enhances student psychological traits, and overall learning experience.

Keywords: Grade retention; attainment; cognitive achievement; high school graduation; parental investmet; self-esteem; learning.

JEL-codes: I21; I26; I30; J24

73 pages, First version: March 31, 2017. Revised: December 7, 2017. Earlier revisions: December 7, 2017.

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