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Risk Aversion and Support for Merit Pay: Theory and Evidence from Minnesota's Q Comp Program


  • Carl Nadler

    () (Department of Economics, University of California, Berkeley)

  • Matthew Wiswall

    () (Department of Economics, New York University)


Recent research attributes the lack of merit pay in teaching to the resistance of teachers. This article examines whether the structure of merit pay affects the types of teachers who support it. We develop a model of the relative utility teachers receive from merit pay versus the current fixed schedule of raises. We show that if teachers are risk averse, teachers with higher base salaries would be more likely to support a merit pay program that allows them to keep their current base salary and risk only future salary increases. We test the predictions of the model using data from a new merit pay program, the Minnesota Q Comp program, which requires the approval of the teachers in each school district. Consistent with the model's predictions, we find that districts with higher base salaries and a higher proportion of teachers with master's degrees are more likely to approve merit pay. © 2011 Association for Education Finance and Policy

Suggested Citation

  • Carl Nadler & Matthew Wiswall, 2011. "Risk Aversion and Support for Merit Pay: Theory and Evidence from Minnesota's Q Comp Program," Education Finance and Policy, MIT Press, vol. 6(1), pages 75-104, January.
  • Handle: RePEc:tpr:edfpol:v:6:y:2011:i:1:p:75-104

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    References listed on IDEAS

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    Cited by:

    1. Nirav Mehta, 2014. "Targeting the Wrong Teachers: Estimating Teacher Quality for Use in Accountability Regimes," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20143, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).

    More about this item


    risk aversion; merit pay; teacher salary; Minnesota; Q Comp program;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid


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