We study exposure to grading bias and provide novel evidence of its impact on mental health. Grading bias, which we interpret as over-grading, is constructed as the residual of final upper secondary school grades having controlled for results in a standardized test, itself not subject to grading leniency. Grading bias is further isolated by considering only within-school variation in over-grading and controlling for prior grades and school production. Using Swedish individual-level register data for individuals graduating from upper secondary school in the years 2001-2004, we show that over-grading has substantial significant protective impacts on the mental health of young adults, but only among female students. That grades themselves, independent of knowledge, substantially impact the production of health highlights an important health production mechanism, and implies that any changes to the design of grading systems must consider these wider health implications.
Keywords: grade inflation; grading bias; human capital development; mental health.
© 2022 The Authors. Health Economics published by John Wiley & Sons Ltd.