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Hidden Teacher Effort in Educational Production: Monitoring vs. Merit Pay

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Author Info

  • Christian Jaag

    (University of St. Gallen Institute of Public Finance & Fiscal Law)

Abstract

This paper deals with the optimality of teacher incentive contracts in the presence of costly or limited government resources. It considers educational production under asymmetric information as a function of teacher effort and class size. In the presence of costly government resources and convex effort costs, teacher monitoring - which is wasteful in principle - may be superior to merit pay in order to induce second-best teacher effort; optimum class size is not affected by informational deficiencies. If the government budget is exogenously fixed, optimum teacher effort may not be affordable, which is shown to make the case for monitoring activity instead of incentive pay even stronger.

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File URL: http://128.118.178.162/eps/hew/papers/0503/0503003.pdf
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Bibliographic Info

Paper provided by EconWPA in its series HEW with number 0503003.

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Length: 24 pages
Date of creation: 18 Mar 2005
Date of revision:
Handle: RePEc:wpa:wuwphe:0503003

Note: Type of Document - pdf; pages: 24
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Web page: http://128.118.178.162

Related research

Keywords: Education; Moral Hazard; Monitoring; Merit Pay; Incentives; Teachers;

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References

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Cited by:
  1. Jaag, Christian, 2006. "Teacher Incentives," MPRA Paper 340, University Library of Munich, Germany.

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