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Pay for Percentile

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Author Info

  • Gadi Barlevy
  • Derek Neal

Abstract

We propose an incentive scheme for educators that links compensation to the ranks of their students within comparison sets. Under certain conditions, this scheme induces teachers to allocate socially optimal levels of effort. Moreover, because this scheme employs only ordinal information, it allows education authorities to employ completely new assessments at each testing date without ever having to equate various assessments. This removes incentives for teachers to teach to a particular assessment form and eliminates opportunities to influence reward pay by corrupting assessment scales. Education authorities can employ separate no-stakes assessment systems to track trends in scaled measures of student achievement. (JEL I21, I28, J33, J45)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.5.1805
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 5 (August)
Pages: 1805-31

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:5:p:1805-31

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References

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  1. Christine Harbring & Gabriele K. Lünser, 2008. "On the Competition of Asymmetric Agents," German Economic Review, Verein für Socialpolitik, vol. 9, pages 373-395, 08.
  2. Atkinson, Adele & Burgess, Simon & Croxson, Bronwyn & Gregg, Paul & Propper, Carol & Slater, Helen & Wilson, Deborah, 2009. "Evaluating the impact of performance-related pay for teachers in England," Labour Economics, Elsevier, vol. 16(3), pages 251-261, June.
  3. Green, Jerry & Stokey, Nancy, 1983. "A Comparison of Tournaments and Contracts," Scholarly Articles 3203644, Harvard University Department of Economics.
  4. Paul Glewwe & Nauman Ilias & Micheal Kremer, 2003. "Teacher incentives," Natural Field Experiments 00257, The Field Experiments Website.
  5. John Cawley & James Heckman & Edward Vytlacil, 1999. "On Policies To Reward The Value Added By Educators," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 720-727, November.
  6. Dale Ballou, 2009. "Test Scaling and Value-Added Measurement," Education Finance and Policy, MIT Press, vol. 4(4), pages 351-383, October.
  7. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
  8. Ladd, Helen F., 1996. "The Dallas School Accountability and Incentive Program: An Evaluation of Its Impacts on Student Outcomes," Working Papers 96-18, Duke University, Department of Economics.
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  12. Derek Neal, 2010. "Aiming for Efficiency Rather Than Proficiency," Journal of Economic Perspectives, American Economic Association, vol. 24(3), pages 119-32, Summer.
  13. Edward P. Lazear, 2001. "Educational Production," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 777-803, August.
  14. Daniel M. Koretz, 2002. "Limitations in the Use of Achievement Tests as Measures of Educators' Productivity," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 752-777.
  15. Scott E. Carrell & James E. West, 2008. "Does Professor Quality Matter? Evidence from Random Assignment of Students to Professors," NBER Working Papers 14081, National Bureau of Economic Research, Inc.
  16. H. Vogt, 1983. "Unimodality of differences," Metrika, Springer, vol. 30(1), pages 165-170, December.
  17. Flavio Cunha & James J. Heckman, 2008. "Formulating, Identifying and Estimating the Technology of Cognitive and Noncognitive Skill Formation," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
  18. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
  19. Jacob, Brian A., 2005. "Accountability, incentives and behavior: the impact of high-stakes testing in the Chicago Public Schools," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 761-796, June.
  20. Carmichael, H Lorne, 1983. "The Agent-Agents Problem: Payment by Relative Output," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 50-65, January.
  21. Jerry R. Green & Nancy L. Stokey, 1982. "A Comparison of Tournaments and Contracts," NBER Working Papers 0840, National Bureau of Economic Research, Inc.
  22. Malcomson, James M, 1984. "Work Incentives, Hierarchy, and Internal Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 486-507, June.
  23. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  24. Victor Lavy, 2002. "Evaluating the Effect of Teachers' Group Performance Incentives on Pupil Achievement," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1286-1317, December.
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Citations

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Cited by:
  1. Pedro Martins, 2010. "Individual Teacher Incentives, Student Achievement and Grade Inflation," CEE Discussion Papers 0112, Centre for the Economics of Education, LSE.
  2. Raj Chetty & John N. Friedman & Jonah E. Rockoff, 2011. "The Long-Term Impacts of Teachers: Teacher Value-Added and Student Outcomes in Adulthood," NBER Working Papers 17699, National Bureau of Economic Research, Inc.
  3. Jere H. Behrman & Susan W. Parker & Petra E. Todd & Kenneth I. Wolpin, 2012. "Aligning Learning Incentives of Students and Teachers: Results from a Social Experiment in Mexican High Schools," PIER Working Paper Archive 13-004, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  4. Cory Koedel & Rebecca Leatherman & Eric Parsons, 2012. "Test Measurement Error and Inference from Value-Added Models," Working Papers 1201, Department of Economics, University of Missouri.
  5. Frederiksen, Anders & Lange, Fabian & Kriechel, Ben, 2012. "Subjective Performance Evaluations and Employee Careers," IZA Discussion Papers 6373, Institute for the Study of Labor (IZA).
  6. Guarino, Cassandra & Reckase, Mark D. & Stacy, Brian & Wooldridge, Jeffrey M., 2014. "A Comparison of Growth Percentile and Value-Added Models of Teacher Performance," IZA Discussion Papers 7973, Institute for the Study of Labor (IZA).
  7. Roland G. Fryer, Jr & Steven D. Levitt & John List & Sally Sadoff, 2012. "Enhancing the Efficacy of Teacher Incentives through Loss Aversion: A Field Experiment," NBER Working Papers 18237, National Bureau of Economic Research, Inc.
  8. Cory Koedel & Jiaxi Li, 2014. "The Efficiency Implications of Using Proportional Evaluations to Shape the Teaching Workforce," Working Papers 1402, Department of Economics, University of Missouri.
  9. Cory Koedel & Mark Ehlert & Eric Parsons & Michael Podgursky, 2012. "Selecting Growth Measures for School and Teacher Evaluations," Working Papers 1210, Department of Economics, University of Missouri.
  10. Ooghe, Erwin & Schokkaert, Erik, 2013. "School Accountability: Can We Reward Schools and Avoid Pupil Selection?," IZA Discussion Papers 7420, Institute for the Study of Labor (IZA).
  11. Derek Neal, 2010. "Aiming for Efficiency Rather Than Proficency," Working Papers 2010-007, Becker Friedman Institute for Research In Economics.
  12. Hasnain, Zahid & Manning, Nick & Pierskalla Henryk, 2012. "Performance-related pay in the public sector : a review of theory and evidence," Policy Research Working Paper Series 6043, The World Bank.
  13. Derek Neal, 2011. "The Design of Performance Pay in Education," NBER Working Papers 16710, National Bureau of Economic Research, Inc.

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