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Pay for Percentile

Author

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  • Barlevy, Gadi

    () (Federal Reserve Bank of Chicago)

  • Neal, Derek

    () (University of Chicago)

Abstract

We propose an incentive pay scheme for educators that links educator compensation to the ranks of their students within appropriately defined comparison sets, and we show that under certain conditions our scheme induces teachers to allocate socially optimal levels of effort to all students. Because this scheme employs only ordinal information, our scheme allows education authorities to employ completely new assessments at each testing date without ever having to equate various assessment forms. Thus, our scheme removes incentives for teachers to teach to a particular assessment form and eliminates any opportunities to influence reward pay by corrupting the equating process or the scales used to report assessment results. Having shown that cardinal measures of achievement growth over time are not a necessary ingredient of incentive systems for educators, we note that education authorities can employ our scheme as a means of providing incentives for educators while employing a separate system for measuring growth in student achievement that involves no stakes for educators. This approach creates no incentives for educators to take actions that contaminate the measurement of student progress.

Suggested Citation

  • Barlevy, Gadi & Neal, Derek, 2009. "Pay for Percentile," IZA Discussion Papers 4383, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4383
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    References listed on IDEAS

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    Cited by:

    1. Scott A. Imberman, 2015. "How effective are financial incentives for teachers?," IZA World of Labor, Institute for the Study of Labor (IZA), pages 158-158, June.
    2. Erwin Ooghe & Erik Schokkaert, 2016. "School accountability: can we reward schools and avoid pupil selection?," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 46(2), pages 359-387, February.
    3. Karachiwalla, Naureen & Park, Albert, 2017. "Promotion incentives in the public sector: Evidence from Chinese schools," Journal of Public Economics, Elsevier, vol. 146(C), pages 109-128.
    4. Jere R. Behrman & Susan W. Parker & Petra E. Todd & Kenneth I. Wolpin, 2015. "Aligning Learning Incentives of Students and Teachers: Results from a Social Experiment in Mexican High Schools," Journal of Political Economy, University of Chicago Press, vol. 123(2), pages 325-364.
    5. Raj Chetty & John N. Friedman & Jonah E. Rockoff, 2011. "The Long-Term Impacts of Teachers: Teacher Value-Added and Student Outcomes in Adulthood," NBER Working Papers 17699, National Bureau of Economic Research, Inc.
    6. Derek Neal, 2010. "Aiming for Efficiency Rather Than Proficency," Working Papers 2010-007, Becker Friedman Institute for Research In Economics.
    7. Koedel, Cory & Mihaly, Kata & Rockoff, Jonah E., 2015. "Value-added modeling: A review," Economics of Education Review, Elsevier, vol. 47(C), pages 180-195.
    8. Cory Koedel & Jiaxi Li, 2016. "The Efficiency Implications Of Using Proportional Evaluations To Shape The Teaching Workforce," Contemporary Economic Policy, Western Economic Association International, vol. 34(1), pages 47-62, January.
    9. Frederiksen, Anders & Lange, Fabian & Kriechel, Ben, 2017. "Subjective performance evaluations and employee careers," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 408-429.
    10. Koedel Cory & Leatherman Rebecca & Parsons Eric, 2012. "Test Measurement Error and Inference from Value-Added Models," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-37, November.
    11. Weerachart T. Kilenthong & Gabriel A. Madeira, 2017. "Observability and endogenous organizations," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(3), pages 587-619, March.
    12. Emiliana Vegas & Alejandro Ganimian, 2013. "Theory and Evidence on Teacher Policies in Developed and Developing Countries," IDB Publications (Working Papers) 4597, Inter-American Development Bank.
    13. Cory Koedel & Mark Ehlert & Eric Parsons & Michael Podgursky, 2012. "Selecting Growth Measures for School and Teacher Evaluations," Working Papers 1210, Department of Economics, University of Missouri.
    14. Hasnain, Zahid & Manning, Nick & Pierskalla Henryk, 2012. "Performance-related pay in the public sector : a review of theory and evidence," Policy Research Working Paper Series 6043, The World Bank.
    15. Derek Neal, 2011. "The Design of Performance Pay in Education," NBER Working Papers 16710, National Bureau of Economic Research, Inc.
    16. Karthik Muralidharan & Venkatesh Sundararaman, 2011. "Teacher Performance Pay: Experimental Evidence from India," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 39-77.
    17. Roland Fryer & Steven Levitt & John List & Sally Sadoff, 2012. "Enhancing the Efficacy of Teacher Incentives through Loss Aversion: A Field Experiment," Framed Field Experiments 00591, The Field Experiments Website.
    18. Martins, Pedro S., 2009. "Individual Teacher Incentives, Student Achievement and Grade Inflation," IZA Discussion Papers 4051, Institute for the Study of Labor (IZA).
    19. Guarino, Cassandra M. & Reckase, Mark D. & Stacy, Brian & Wooldridge, Jeffrey M., 2014. "A Comparison of Growth Percentile and Value-Added Models of Teacher Performance," IZA Discussion Papers 7973, Institute for the Study of Labor (IZA).
    20. Gjefsen, Hege Marie & Gunnes, Trude, 2016. "The effects of School Accountability on Teacher Mobility and Teacher Sorting," MPRA Paper 69664, University Library of Munich, Germany.
    21. Diane Whitmore Schanzenbach, 2015. "Current themes in education policy in the United States," Chapters,in: Social Policies in an Age of Austerity, chapter 7, pages 165-180 Edward Elgar Publishing.
    22. Sarah R. Cohodes, 2016. "Teaching to the Student: Charter School Effectiveness in Spite of Perverse Incentives," Education Finance and Policy, MIT Press, vol. 11(1), pages 1-42, Winter.
    23. Hege Marie Gjefsen & Trude Gunnes, 2015. "School accountability Incentives or sorting?," Discussion Papers 815, Statistics Norway, Research Department.

    More about this item

    Keywords

    compensation; education; tournaments;

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • I20 - Health, Education, and Welfare - - Education - - - General

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