In a study that appeared in the Journal of Educational Psychology (August 2011), Caroline Pulfrey et al., took Swiss students who were in their upper teens and mid twenties from an English as a foreign language class and asked them to do assignments that involved listening and comprehending.
There were 3 experiments.
In the first experiment, one group of students were told that they would receive a grade for their learning while the other group was told they would not receive a grade. In the second experiment, on a single assignment students either received only a grade, only a comment, or a grade and a comment. The third experiment was similar to the second experiment, but this time the students received their respective feedback and completed a second assignment.
Together these three experiments revealed that the anticipation of a grade, as opposed to no feedback or a comment, increases performance avoidance, a fear of failure and a loss of interest. It's important to note that this was true of both high and low achieving students. While conventional wisdom might tell us that grading should inspire learners to do their best, this is not what the research is telling us.
Common sense might also convince us to adopt a "more the merrier" kind of attitude towards providing students with both a comment and a grade, but again, research shows that the presence of a grade (with or without a comment) is responsible for lower levels of motivation, a loss of interest for learning, and a preference for easier tasks. Unfortunately, the positive benefits of a formative comment is overshadowed by the negative effects of the grade.
All this supports Ruth Butler's (1988) research from twenty years ago that grades and grades with a comment are responsible for lower levels of intrinsic motivation for learning.
If you are looking to increase a child's anxiety, desire to escape and fear of failure, or decrease their intrinsic motivation and self-efficacy then it makes perfect sense to grade students.
However, if you are interested in helping children learn, you might want to consider leaving the grade out and only providing them with the formative comments they need to improve.
If the idea of abolishing grading incites a cold case of cognitive dissonance, the Grading Moratorium is a group of teachers you can collaborate with and join.
For more anecdotal evidence on why we should abolish grading, check out my Abolish Grading page. For more on the scientific research on why we should abolish grading, check out Alfie Kohn's articles The Case Against Grades, From Degrading to De-grading, and Grading: The Issue is not How but Why,