"The impact of Early Grade Retention on the Academic Achievement and Self-Esteem of Seventh and Eighth Grade Students." From a paper presented at the Annual convention of the National Association of School Psychologists (March 1994). It is available free online.
From the Discussion/conclusions:
The results of this study supported the hypothesis that retained students had significantly lower academic achievement and self-esteem scores than the promoted pupils. Thus, reinforcing the statement that retention as an intervention is ineffective and that educators who believe they are "helping" students by holding them back are really making a false assumption.
These results concurred with one of the first longitudinal studies on retention ever conducted. Kamii and Weikart (1963) found that retention does not benefit students in the long run. Thirty years later, there is still little proof that nonpromotion is advantageous to pupils. In fact, studies such as Smith and Shepard's (1987) contend that children view retention as punishment and experience emotions such as fear, anger and sadness when not promotive.
Possibly one of the most damaging aspects of retention is the drop out rate that occurs after the nonpromotion practice has taken place. Dawson and Rafoth (1991) reported that being held back once increases a pupil's likelihood of quitting school by 30%. Even more staggering is the fact that being held back twice makes dropping out of school a virtual certainty.