Retaking in High Stakes Exams: Is Less More?

Placement, both in university and in the civil service, according to performance in competitive exams is the norm in much of the world. Repeat taking of such exams is common despite the private and social costs it imposes. We develop and estimate a structural model of exam retaking using data from Turkey`s university placement exam. Limiting retaking results in all agents gaining ex-ante, and most gaining expost. This result comes from a general equilibrium effect: retakers crowd the market and impose negative spillovers on others by raising acceptance cutoffs.