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Preferences, Selection, and the Structure of Teacher Pay

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  • Andrew C. Johnston

Abstract

I examine teacher preferences using a discrete-choice experiment linked to data on teacher effectiveness. I estimate willingness to pay for a rich set of compensation elements and working conditions. Highly effective teachers usually have the same preferences as their peers, but they have stronger preferences for performance pay. I use the preference estimates to investigate the optimal compensation structure for three key objectives: maximizing teacher utility, maximizing teacher retention, and maximizing student achievement. Under each objective, schools underutilize salary and performance pay while overutilizing retirement benefits. Restructuring compensation can significantly improve both teacher welfare and student achievement.

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  • Andrew C. Johnston, 2025. "Preferences, Selection, and the Structure of Teacher Pay," American Economic Journal: Applied Economics, American Economic Association, vol. 17(3), pages 310-346, July.
    • Handle: RePEc:aea:aejapp:v:17:y:2025:i:3:p:310-46
    DOI: 10.1257/app.20210763
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions

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