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Paying for Performance: The Effect of Teachers' Financial Incentives on Students' Scholastic Outcomes

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  • Lavy, Victor

Abstract

Performance-related pay for teachers is being introduced in many countries, but there is little evaluation to date on the effects of such programmes. This Paper evaluates a particular incentive experiment. The incentive program is a rank-order tournament among teachers of English, Hebrew, and mathematics. Teachers were rewarded with cash bonuses for improvements in their students’ performance on high-school matriculation exams. Since the schools in the programme were not selected at random, the evaluation is based on comparison groups. Three alternative identification strategies are used to estimate the causal effect of the programme: a natural experiment stemming from measurement error in the assignment variable, a regression discontinuity method, and propensity score matching. The results of all three methods tell a consistent story: teachers’ monetary performance incentives have a significant effect on students’ achievements in English and math. No spillover effect on untreated subjects is evident and the general equilibrium impact of the programme is positive as well. The programme is also more cost-effective than alternative forms of intervention such as extra instruction time and is as effective as cash bonuses for students.

Suggested Citation

  • Lavy, Victor, 2003. "Paying for Performance: The Effect of Teachers' Financial Incentives on Students' Scholastic Outcomes," CEPR Discussion Papers 3862, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3862
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Thomas J. Kane & Douglas O. Staiger, 2002. "The Promise and Pitfalls of Using Imprecise School Accountability Measures," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 91-114, Fall.
    2. Paul Glewwe & Nauman Ilias & Michael Kremer, 2010. "Teacher Incentives," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 205-227, July.
    3. Eric D. Gould & Victor Lavy & M. Daniele Paserman, 2004. "Immigrating to Opportunity: Estimating the Effect of School Quality Using a Natural Experiment on Ethiopians in Israel," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 489-526.
    4. Jonah E. Rockoff, 2004. "The Impact of Individual Teachers on Student Achievement: Evidence from Panel Data," American Economic Review, American Economic Association, vol. 94(2), pages 247-252, May.
    5. Jean-Michel Plassard & Nhu Tran Thi Thanh, 2009. "Liberté de choix des élèves et concurrence des établissements : un survey de l'analyse du pilotage des systèmes éducatifs par les quasi-marchés," Revue d'économie industrielle, De Boeck Université, vol. 0(2), pages 99-130.
    6. Kaoru Nabeshima, 2003. "Raising the quality of secondary education in East Asia," Policy Research Working Paper Series 3140, The World Bank.
    7. Jonah Rockoff, 2003. "The Impact of Individual Teachers on Student Achievement: Evidence from Panel Data," Public Economics 0304002, EconWPA.

    More about this item

    Keywords

    students achievement; teachers incentives;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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