The Cost of Retention Under a Test-Based Promotion Policy for Taxpayers and Students

Prior research substantially overstates the cost of retention under test-based promotion policies to both taxpayers and students who delay labor market entry because it omits two important factors. First, there is a delay between the intervention and the taxpayer’s expenditure. Second, on average, the treatment leads to less than a full year of additional schooling. I provide formulas for calculating the cost of grade retention within a test-based promotion policy and illustrate using data from Florida. Retaining a third-grade student under Florida’s policy was about 45% less costly to taxpayers and about 37% less costly to retained students than would be suggested by prior authors.