Making the (Letter) Grade: The Incentive Effects of Mandatory Pass/Fail Courses

In fall 2014, Wellesley College began mandating pass/fail grading for courses taken by first-year, first-semester students, although instructors continued to record letter grades. We identify the causal effect of the policy on course choice and performance, using a regression-discontinuity-in-time design. Students shifted to lower-grading science, technology, engineering, and mathematics (STEM) courses in the first semester, but did not increase their engagement with STEM in later semesters. Letter grades of first-semester students declined by 0.13 grade points, or 23 percent of a standard deviation. We evaluate causal channels of the grade effect—including sorting into lower-grading STEM courses and declining instructional quality—and conclude that the effect is consistent with declining student effort.