Individual Teacher Incentives, Student Achievement and Grade Inflation

How do teacher incentives affect student achievement? Here we examine the effects of the recent introduction of teacher performance-related pay and tournaments in Portugal's public schools. Specifically, we conduct a difference-in-differences analysis based on population matched student-school panel data and two complementary control groups: public schools in autonomous regions that were exposed to lighter versions of the reform; and private schools, which are subject to the same national exams but whose teachers were not affected by the reform. We find that the focus on individual teacher performance decreased student achievement, particularly in terms of national exams, and increased grade inflation.