Students often face incentives to reach grade thresholds, for instance, to pass a course, to enter university, or to receive a scholarship. We study how such threshold incentives affect students’ short and long-run academic performance. In a field experiment, we incentivize students to reach a certain GPA. Our design allows us to estimate heterogeneous treatment effects across the entire GPA distribution. To examine the underlying mechanisms, we link academic performance with comprehensive survey data collected before and after the intervention. When the incentives are in place, only students just below the threshold improve their performance. However, when we remove the incentives, low-ability students perform worse. The survey data indicate that treated students who fail to reach the threshold lose confidence in their ability, which reduces their post-intervention performance. We find large gender differences: the positive short-run effects are driven by males, and the negative long-run effects are driven by females. Our results suggest that threshold incentives can have unexpected negative consequences when self-confidence is relevant for performance.
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