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The Design of Performance Pay in Education

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  • Derek Neal
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    Abstract

    This chapter analyzes the design of incentive schemes in education while reviewing empirical studies that evaluate performance pay programs for educators. Several themes emerge. First, it is difficult to use one assessment system to create both educator performance metrics and measures of student achievement. To mitigate incentives for coaching, incentive systems should employ assessments that vary in both format and item content. Separate no-stakes assessments provide more reliable information about student achievement because they create no incentives for educators to take hidden actions that contaminate student test scores. Second, relative performance schemes are rare in education even though they are more difficult to manipulate than systems built around psychometric or subjective performance standards. Third, assessment-based incentive schemes are mechanisms that complement rather than substitute for systems that promote parental choice, e.g. vouchers and charter schools.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16710.

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    Date of creation: Jan 2011
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    Publication status: published as "The Design of Performance Pay in Education," Handbook of Economics of Education. Volume 4. 2011
    Handle: RePEc:nbr:nberwo:16710

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    1. Julie Berry Cullen & Randall Reback, 2006. "Tinkering Toward Accolades: School Gaming Under a Performance Accountability System," NBER Working Papers 12286, National Bureau of Economic Research, Inc.
    2. Ladd, Helen F., 1999. "The Dallas school accountability and incentive program: an evaluation of its impacts on student outcomes," Economics of Education Review, Elsevier, vol. 18(1), pages 1-16, February.
    3. Barlevy, Gadi & Neal, Derek, 2009. "Pay for Percentile," IZA Discussion Papers 4383, Institute for the Study of Labor (IZA).
    4. Flavio Cunha & James J. Heckman & Susanne M. Schennach, 2010. "Estimating the Technology of Cognitive and Noncognitive Skill Formation," Econometrica, Econometric Society, vol. 78(3), pages 883-931, 05.
    5. Charles T. Clotfelter & Helen F. Ladd & Jacob L. Vigdor & Roger Aliaga Diaz, 2004. "Do school accountability systems make it more difficult for low-performing schools to attract and retain high-quality teachers?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 23(2), pages 251-271.
    6. Karthik Muralidharan & Venkatesh Sundararaman, 2011. "Teacher Performance Pay: Experimental Evidence from India," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 39 - 77.
    7. 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.
    8. Figlio, David & Loeb, Susanna, 2011. "School Accountability," Handbook of the Economics of Education, Elsevier.
    9. Jesse Rothstein, 2008. "Teacher Quality in Educational Production: Tracking, Decay, and Student Achievement," NBER Working Papers 14442, National Bureau of Economic Research, Inc.
    10. Joshua Angrist & Eric Bettinger & Michael Kremer, 2004. "Long-term consequences of secondary school vouchers: Evidence from administrative records in colombia," Natural Field Experiments 00204, The Field Experiments Website.
    11. 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.
    12. Victor Lavy, 2009. "Performance Pay and Teachers' Effort, Productivity, and Grading Ethics," American Economic Review, American Economic Association, vol. 99(5), pages 1979-2011, December.
    13. Lisa Barrow & Cecilia Elena Rouse, 2008. "School vouchers and student achievement: recent evidence, remaining questions," Working Paper Series WP-08-08, Federal Reserve Bank of Chicago.
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    Cited by:
    1. Ferreyra, Maria Marta & Liang, Pierre Jinghong, 2012. "Information asymmetry and equilibrium monitoring in education," Journal of Public Economics, Elsevier, vol. 96(1), pages 237-254.
    2. Hanushek, Eric A. & Wößmann, Ludger, 2011. "Overview of the symposium on performance pay for teachers," Munich Reprints in Economics 20402, University of Munich, Department of Economics.
    3. 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.
    4. Lockheed, Marlaine E., 2014. "Teacher opinions on performance incentives : evidence from the Kyrgyz Republic," Policy Research Working Paper Series 6752, The World Bank.
    5. Roland G. Fryer, 2011. "Teacher Incentives and Student Achievement: Evidence from New York City Public Schools," NBER Working Papers 16850, National Bureau of Economic Research, Inc.
    6. Jones, Michael D., 2012. "Teacher Behavior under Performance Pay Incentives," MPRA Paper 43892, University Library of Munich, Germany.

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