(Un)Intended Effects of a Teacher Bonus Tournament

The current literature on teacher performance pay programs has estimated the ex ante incentive effect by comparing participants with nonparticipants. This is the first study, to my knowledge, that extends the literature by estimating the ex post effect of receiving the pay increase by comparing participant bonus recipients with nonrecipients, which otherwise face identical incentives. I exploit a teacher bonus program in Chile and use a sharp regression discontinuity design to identify a causal effect. Using administrative longitudinal data, I evaluate the effect of two bonus sizes on teacher and student outcomes. I find that the bonus leads to improvements in incentivized standardized scores (used to determine the bonus allocation for the following year) in private schools only. The bonus has no effect on municipal school students’ scores, nonincentivized test scores in any school type, or student sorting. There is only weak suggestive evidence for teacher-retention efforts by winner schools. I also find that the higher bonus size does not have an additional effect above and beyond the lower one. The results have direct policy implications.