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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)

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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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Publisher 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
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Handle: RePEc:wpa:wuwphe:0503003

Note: Type of Document - pdf; pages: 24
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Web page: http://129.3.20.41

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Related research
Keywords: Education Moral Hazard Monitoring Merit Pay Incentives Teachers

Find related papers by JEL classification:
I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
I28 - Health, Education, and Welfare - - Education - - - Government Policy
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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    Other versions:
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    Other versions:
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    Other versions:
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    Other versions:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jaag, Christian, 2006. "Teacher Incentives," MPRA Paper 340, University Library of Munich, Germany. [Downloadable!]
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