Twenty-one states offer merit scholarships that require students to maintain a minimum grade point average (GPA). Using a comprehensive administrative database from Clemson University, this study estimates the relationship between the incentives created by a South Carolina merit scholarship (LIFE) and students' academic performance. I hypothesize that being at risk of gaining or losing this scholarship will lead to increased effort and, as a consequence, higher grades. The results suggest that the incentives created by the scholarship increase GPAs by as much as 0.101 on a four-point scale, controlling for student and course characteristics. Moreover, the results indicate that for men the relationship between the risk of gaining or losing the scholarship and grades is large and statistically significant; for women, however, there is little evidence that the scholarship is related to grades.

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