Public sector performance disclosure: salary and career outcomes for top managers and employees

Public sector organizations around the world are held to account on the basis of objective measures of performance. This paper investigates, for the first time, the impact of subjective school inspection ratings on labor market and career outcomes for school principals, senior managers and teachers. Employing unique school inspection data and the population of teachers in secondary schools in England, we compare personnel in schools experiencing a rating change with those in schools with no change in inspection rating, in a difference-in-differences framework. A change in the overall school inspection rating has substantial impact on principals' wages and their rate of exit from public sector schooling, but the impact on teachers is much more muted. Our findings suggest that competition is a key mechanism through which changes in school inspection ratings affect school personnel labor market outcomes. Importantly, exploiting novel inspection sub-grade data on school leadership and management quality enables us to assess the impact on principals arising from this direct channel, over and above the response to overall school ratings. It reveals that the rating for this specific dimension of quality is an important channel driving principals' outcomes. These results shed new light on the impact of subjective quality assessments on the careers of public sector managers and employees.