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Performance Pay and Teachers' Effort, Productivity, and Grading Ethics

  • Victor Lavy

This paper presents evidence about the effect of individual monetary incentives on English and math teachers in Israel. Teachers were rewarded with cash bonuses for improving their students' performance in high-school matriculation exams. The main identification strategy is based on measurement error in the assignment to treatment variable that produced a randomized treatment sample. The incentives led to significant improvements in test taking rates, conditional pass rates, and mean test scores. Improvements were mediated through changes in teaching methods, enhanced after-school teaching, and increased responsiveness to students' needs. No evidence was found of manipulation of test scores by teachers. (JEL I21, J31, J45)

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

Volume (Year): 99 (2009)
Issue (Month): 5 (December)
Pages: 1979-2011

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Handle: RePEc:aea:aecrev:v:99:y:2009:i:5:p:1979-2011
Note: DOI: 10.1257/aer.99.5.1979
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  1. Green, Jerry & Stokey, Nancy, 1983. "A Comparison of Tournaments and Contracts," Scholarly Articles 3203644, Harvard University Department of Economics.
  2. 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.
  3. 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.
  4. Richards, Craig E. & Sheu, Tian Ming, 1992. "The South Carolina school incentive reward program: A policy analysis," Economics of Education Review, Elsevier, vol. 11(1), pages 71-86, March.
  5. Lavy, Victor & Schlosser, Analia, 2004. "Targeted Remedial Education for Underperforming Teenagers: Costs and Benefits," CEPR Discussion Papers 4381, C.E.P.R. Discussion Papers.
  6. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
  7. Paul Glewwe & Nauman Ilias & Michael Kremer, 2010. "Teacher Incentives," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 205-27, July.
  8. C. Kirabo Jackson, 2010. "A Little Now for a Lot Later: A Look at a Texas Advanced Placement Incentive Program," Journal of Human Resources, University of Wisconsin Press, vol. 45(3).
  9. Derek Neal & Diane Whitmore Schanzenbach, 2007. "Left Behind By Design: Proficiency Counts and Test-Based Accountability," NBER Working Papers 13293, National Bureau of Economic Research, Inc.
  10. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  11. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, vol. 64(4), pages 605-54, October.
  12. Joshua D. Angrist & Victor Lavy, 1999. "Using Maimonides' Rule To Estimate The Effect Of Class Size On Scholastic Achievement," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 533-575, May.
  13. Kandel, E. & Lazear, E.P., 1990. "Peer Pressure and Partnerships," Papers 90-07, Rochester, Business - Managerial Economics Research Center.
  14. 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.
  15. Esther Duflo & Rema Hanna, 2005. "Monitoring Works: Getting Teachers to Come to School," NBER Working Papers 11880, National Bureau of Economic Research, Inc.
  16. Caroline M. Hoxby, 2000. "The Effects Of Class Size On Student Achievement: New Evidence From Population Variation," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1239-1285, November.
  17. Angrist, Joshua & Lavy, Victor, 2004. "The Effect of High Stakes High School Achievement Awards: Evidence from a School-Centered Randomized Trial," IZA Discussion Papers 1146, Institute for the Study of Labor (IZA).
  18. Hanushek, Eric A., 2002. "Publicly provided education," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 30, pages 2045-2141 Elsevier.
  19. Robert Gibbons, 1998. "Incentives in Organizations," NBER Working Papers 6695, National Bureau of Economic Research, Inc.
  20. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Wiley Blackwell, vol. 65(2), pages 261-94, April.
  21. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  22. Emiliana Vegas, 2005. "Incentives to Improve Teaching : Lessons from Latin America," World Bank Publications, The World Bank, number 7265, August.
  23. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-64, April.
  24. 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.
  25. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  26. Brian A. Jacob & Steven D. Levitt, 2003. "Rotten Apples: An Investigation of the Prevalence and Predictors of Teacher Cheating," NBER Working Papers 9413, National Bureau of Economic Research, Inc.
  27. Gaynor, Martin & Pauly, Mark V, 1990. "Compensation and Productive Efficiency of Partnerships: Evidence from Medical Group Practice," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 544-73, June.
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