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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. Victor Lavy, 2004. "Performance Pay and Teachers' Effort, Productivity and Grading Ethics," NBER Working Papers 10622, National Bureau of Economic Research, Inc.
    2. Susanne Schennach & James Heckman & Flavio Cunha, 2007. "Estimating the Technology of Cognitive and Noncognitive Skill Formation," 2007 Meeting Papers 973, Society for Economic Dynamics.
    3. 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.
    4. Adele Atkinson & Simon Burgess & Bronwyn Croxson & Paul Gregg, 2004. "Evaluating the Impact of Performance-related Pay for Teachers in England," The Centre for Market and Public Organisation 04/113, Department of Economics, University of Bristol, UK.
    5. Jesse Rothstein, 2010. "Teacher Quality in Educational Production: Tracking, Decay, and Student Achievement," The Quarterly Journal of Economics, MIT Press, vol. 125(1), pages 175-214, February.
    6. Gadi Barlevy & Derek Neal, 2009. "Pay for percentile," Working Paper Series WP-09-09, Federal Reserve Bank of Chicago.
    7. 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.
    8. 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.
    9. 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.
    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. 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.
    12. 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.
    13. Figlio, David & Loeb, Susanna, 2011. "School Accountability," Handbook of the Economics of Education, Elsevier.
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    Cited by:
    1. Lockheed, Marlaine E., 2014. "Teacher opinions on performance incentives : evidence from the Kyrgyz Republic," Policy Research Working Paper Series 6752, The World Bank.
    2. Jones, Michael D., 2012. "Teacher Behavior under Performance Pay Incentives," MPRA Paper 43892, University Library of Munich, Germany.
    3. 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.
    4. Hanushek, Eric A. & Woessmann, Ludger, 2011. "Overview of the symposium on performance pay for teachers," Economics of Education Review, Elsevier, vol. 30(3), pages 391-393, June.
    5. 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.
    6. 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.

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