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Double for Nothing? Experimental Evidence on an Unconditional Teacher Salary Increase in Indonesia

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  • Joppe de Ree
  • Karthik Muralidharan
  • Menno Pradhan
  • Halsey Rogers

Abstract

How does a large unconditional increase in salary affect the performance of incumbent employees in the public sector? We present experimental evidence on this question in the context of a policy change in Indonesia that led to a permanent doubling of teacher base salaries. Using a large-scale randomized experiment across a representative sample of Indonesian schools that accelerated this pay increase for teachers in treated schools, we find that the large pay increase significantly improved teachers' satisfaction with their income, reduced the incidence of teachers holding outside jobs, and reduced self-reported financial stress. Nevertheless, after two and three years, the increase in pay led to no improvement in student learning outcomes. The effects are precisely estimated, and we can rule out even modest positive impacts on test scores. Our results suggest that unconditional pay increases are unlikely to be an effective policy option for improving the effort and productivity of incumbent employees in public-sector settings.

Suggested Citation

  • Joppe de Ree & Karthik Muralidharan & Menno Pradhan & Halsey Rogers, 2018. "Double for Nothing? Experimental Evidence on an Unconditional Teacher Salary Increase in Indonesia," The Quarterly Journal of Economics, Oxford University Press, vol. 133(2), pages 993-1039.
  • Handle: RePEc:oup:qjecon:v:133:y:2018:i:2:p:993-1039.
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    File URL: http://hdl.handle.net/10.1093/qje/qjx040
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    Cited by:

    1. Chatib Basri & Hal Hill, 2020. "Making Economic Policy in a Democratic Indonesia: The First Two Decades," Asian Economic Policy Review, Japan Center for Economic Research, vol. 15(2), pages 214-234, July.
    2. Isaac Mbiti & Karthik Muralidharan & Mauricio Romero & Youdi Schipper & Constantine Manda & Rakesh Rajani, 2019. "Inputs, Incentives, and Complementarities in Education: Experimental Evidence from Tanzania," The Quarterly Journal of Economics, Oxford University Press, vol. 134(3), pages 1627-1673.
    3. Luigi Butera & Philip Grossman & Daniel Houser & John List & Marie Villeval, 2020. "A New Mechanism to Alleviate the Crises of Confidence in Science With An Application to the Public Goods GameA Review," Working Papers halshs-02512932, HAL.
    4. Luigi Butera & Philip J. Grossman & Daniel Houser & John A. List & Marie-Claire Villeval, 2020. "A New Mechanism to Alleviate the Crises of Confidence in Science-With An Application to the Public Goods Game," NBER Working Papers 26801, National Bureau of Economic Research, Inc.
    5. Bold, Tessa & Kimenyi, Mwangi & Mwabu, Germano & Ng’ang’a, Alice & Sandefur, Justin, 2018. "Experimental evidence on scaling up education reforms in Kenya," Journal of Public Economics, Elsevier, vol. 168(C), pages 1-20.
    6. Greaves, Ellen & Sibieta, Luke, 2019. "Constrained optimisation? Teacher salaries, school resources and student achievement," Economics of Education Review, Elsevier, vol. 73(C).
    7. Juan F. Castro & Paul Glewwe & Ricardo Montero, 2019. "Work With What You’ve Got: Improving Teachers’ Pedagogical Skills at Scale in Rural Peru," Working Papers 158, Peruvian Economic Association.
    8. Pipit Novita, 2019. "What Happened to Initial Teacher Education in Indonesia? AReview of the Literature," European Journal of Social Sciences Education and Research Articles, European Center for Science Education and Research, vol. 6, EJSER Sep.
    9. W. Bentley MacLeod & Miguel Urquiola, 2018. "Is Education Consumption or Investment? Implications for the Effect of School Competition," NBER Working Papers 25117, National Bureau of Economic Research, Inc.
    10. Eunice S. Han, 2020. "The Myth of Unions’ Overprotection of Bad Teachers: Evidence from the District–Teacher Matched Data on Teacher Turnover," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 59(2), pages 316-352, April.
    11. Berlinski, Samuel & Ramos, Alejandra, 2020. "Teacher mobility and merit pay: Evidence from a voluntary public award program," Journal of Public Economics, Elsevier, vol. 186(C).
    12. Karthik Muralidharan & Paul Niehaus, 2017. "Experimentation at Scale," Journal of Economic Perspectives, American Economic Association, vol. 31(4), pages 103-124, Fall.
    13. Davide Viviano & Jelena Bradic, 2020. "Fair Policy Targeting," Papers 2005.12395, arXiv.org.
    14. Evi Oktavia, 2020. "Vocational Teacher Productivity in Palembang: Education Production Function," Accounting and Finance, Institute of Accounting and Finance, issue 4, pages 112-119, December.
    15. Nagler, Markus & Piopiunik, Marc & West, Martin R., 2019. "Weak Markets, Strong Teachers: Recession At Career Start and Teacher Effectiveness," Rationality and Competition Discussion Paper Series 137, CRC TRR 190 Rationality and Competition.
    16. World Bank, 2018. "Indonesia Economic Quarterly, June 2018," World Bank Other Operational Studies 29921, The World Bank.

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