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Performance Pay and Teachers' Effort, Productivity and Grading Ethics

Listed author(s):
  • Victor Lavy

Performance-related incentive pay for teachers is being introduced in many countries, but there is little evidence of its effects. This paper evaluates a rank-order tournament among teachers of English, Hebrew, and mathematics in Israel. Teachers were rewarded with cash bonuses for improving their students' performance on high-school matriculation exams. Two identification strategies were used to estimate the program effects, a regression discontinuity design and propensity score matching. The regression discontinuity method exploits both a natural experiment stemming from measurement error in the assignment variable and a sharp discontinuity in the assignment-to-treatment variable. The results suggest that performance incentives have a significant effect on directly affected students with some minor spillover effects on untreated subjects. The improvements appear to derive from changes in teaching methods, after-school teaching, and increased responsiveness to students' needs. No evidence found for teachers' manipulation of test scores. The program appears to have been more cost-effective than school-group cash bonuses or extra instruction time and is as effective as cash bonuses for students.

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File URL: http://www.nber.org/papers/w10622.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10622.

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Date of creation: Jul 2004
Publication status: published as Lavy, Victor. "Performance Pay and Teachers' Effort, Productivity, and Grading Ethics." American Economic Review 99, 5 (2009): 1979-2011.
Handle: RePEc:nbr:nberwo:10622
Note: ED LS
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  3. Victor Lavy, 2009. "Performance Pay and Teachers' Effort, Productivity, and Grading Ethics," American Economic Review, American Economic Association, vol. 99(5), pages 1979-2011, December.
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  10. Atkinson, Adele & Burgess, Simon & Croxson, Bronwyn & Gregg, Paul & Propper, Carol & Slater, Helen & Wilson, Deborah, 2009. "Evaluating the impact of performance-related pay for teachers in England," Labour Economics, Elsevier, vol. 16(3), pages 251-261, June.
  11. Hanushek, Eric A., 2002. "Publicly provided education," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 30, pages 2045-2141 Elsevier.
  12. Victor Lavy & Analia Schlosser, 2005. "Targeted Remedial Education for Underperforming Teenagers: Costs and Benefits," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 839-874, October.
  13. Emiliana Vegas, 2005. "Incentives to Improve Teaching : Lessons from Latin America," World Bank Publications, The World Bank, number 7265, December.
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  17. C. Kirabo Jackson, 2010. "A Little Now for a Lot Later: A Look at a Texas Advanced Placement Incentive Program," Journal of Human Resources, University of Wisconsin Press, vol. 45(3).
  18. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  19. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
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  21. 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.
  22. James J. Heckman & Hidehiko Ichimura & Petra Todd, 1998. "Matching As An Econometric Evaluation Estimator," Review of Economic Studies, Oxford University Press, vol. 65(2), pages 261-294.
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  24. Derek Neal & Diane Whitmore Schanzenbach, 2007. "Left Behind By Design: Proficiency Counts and Test-Based Accountability," NBER Working Papers 13293, National Bureau of Economic Research, Inc.
  25. Victor Lavy, 2002. "Evaluating the Effect of Teachers' Group Performance Incentives on Pupil Achievement," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1286-1317, December.
  26. Joshua D. Angrist & Victor Lavy, 1999. "Using Maimonides' Rule to Estimate the Effect of Class Size on Scholastic Achievement," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 533-575.
  27. Angrist, Joshua & Lavy, Victor, 2004. "The Effect of High Stakes High School Achievement Awards: Evidence from a School-Centered Randomized Trial," IZA Discussion Papers 1146, Institute for the Study of Labor (IZA).
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