Grade Retention and Unobserved Heterogeneity

34 Pages Posted: 8 Jul 2014

See all articles by Robert J. Gary-Bobo

Robert J. Gary-Bobo

Université Paris I Panthéon-Sorbonne; CREST ENSAE; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Marion Gousse

Université Laval

Jean-Marc Robin


Date Written: June 25, 2014


We study the treatment effect of grade retention, using a panel of French junior high school students, taking unobserved heterogeneity and the endogeneity of grade repetitions into account. We specify a multi-stage model of human-capital accumulation with a finite number of types representing unobserved individual characteristics. Class-size and latent student-performance indices are assumed to follow finite mixtures of normal distributions. Grade retention may increase or decrease the student’s knowledge capital in a type-dependent way. Our estimation results show that the Average Treatment effect on the Treated (ATT) of grade retention on test scores is small but positive at the end of grade 9. The ATT of grade retention is higher for the weakest students. We also show that class size is endogenous and tends to increase with unobserved student ability. The Average Treatment Effect (ATE) of grade retention is negative, again with the exception of the weakest group of students. Grade repetitions reduce the probability of access to grade 9 of all student types.

Keywords: secondary education, grade retention, unobserved heterogeneity, finite mixtures of normal distributions, treatment effects, class-size effects

JEL Classification: M50

Suggested Citation

Gary-Bobo, Robert J. and Gousse, Marion and Robin, Jean-Marc, Grade Retention and Unobserved Heterogeneity (June 25, 2014). CESifo Working Paper Series No. 4846, Available at SSRN: or

Robert J. Gary-Bobo (Contact Author)

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005

CREST ENSAE ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
+33141176031 (Phone)


CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Marion Gousse

Université Laval ( email )

2214 Pavillon J-A. DeSeve
Quebec, Quebec G1K 7P4

Jean-Marc Robin

SciencesPo ( email )

Rue de l'Université 13

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