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Achievement effects of individual performance incentives in a teacher merit pay tournament

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  • Brehm, Margaret
  • Imberman, Scott A.
  • Lovenheim, Michael F.

Abstract

This paper examines the role of worker performance feedback and measurement precision in the design of incentive pay systems, specifically in the context of an individual teacher value-added merit pay tournament. We first build a model in which workers use proximity to an award threshold to update their beliefs about their own ability, which informs their expected marginal return to effort. The model predicts that effort will be maximized at some point proximal to but above the award threshold in order to maximize the likelihood of winning an award when effort translates into value-added with noise. As the noise in the value-added measure increases, teacher effort becomes less responsive to prior value-added because the value-added score becomes a less reliable measure of ability. Using administrative teacher-student linked data from Houston, we test the central prediction of the model that there should be excess achievement gains near award thresholds. The data strongly reject the existence of such excess gains. We argue that a likely reason for this lack of responsiveness is that the value-added measures used to determine awards were too noisy to provide informative feedback about one's ability.

Suggested Citation

  • Brehm, Margaret & Imberman, Scott A. & Lovenheim, Michael F., 2017. "Achievement effects of individual performance incentives in a teacher merit pay tournament," Labour Economics, Elsevier, vol. 44(C), pages 133-150.
  • Handle: RePEc:eee:labeco:v:44:y:2017:i:c:p:133-150
    DOI: 10.1016/j.labeco.2016.12.008
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    Cited by:

    1. Marx, Benjamin M., 2018. "Dynamic Bunching Estimation with Panel Data," MPRA Paper 88647, University Library of Munich, Germany.
    2. Julie Berry Cullen & Cory Koedel & Eric Parsons, 2016. "The Compositional Effect of Rigorous Teacher Evaluation on Workforce Quality," Working Papers 1614, Department of Economics, University of Missouri, revised Mar 2019.
    3. David J. Deming & David Figlio, 2016. "Accountability in US Education: Applying Lessons from K-12 Experience to Higher Education," Journal of Economic Perspectives, American Economic Association, vol. 30(3), pages 33-56, Summer.
    4. Julie Berry Cullen & Cory Koedel & Eric Parsons, 2016. "The Compositional Effect of Rigorous Teacher Evaluation on Workforce Quality," CESifo Working Paper Series 6185, CESifo Group Munich.

    More about this item

    Keywords

    Teacher incentive pay; Value-added; Teacher productivity;

    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
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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