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Double for Nothing? Experimental Evidence on the Impact of an Unconditional Teacher Salary Increase on Student Performance in Indonesia

Author

Listed:
  • Joppe de Ree
  • Karthik Muralidharan
  • Menno Pradhan
  • Halsey Rogers

Abstract

How does a large unconditional increase in salary affect employee performance in the public sector? We present the first experimental evidence on this question in the context of a unique policy change in Indonesia that led to a permanent doubling of base teacher salaries. Using a large-scale randomized experiment across a representative sample of Indonesian schools that accelerated this doubling of pay for teachers in treatment schools, we find that the doubling of pay significantly improved teacher satisfaction with their income, reduced the incidence of teachers holding outside jobs, and reduced self-reported financial stress. Nevertheless, after two and three years, the doubling in pay led to no improvements in measures of teacher effort, and had no impact whatsoever on student learning outcomes. Thus, contrary to the predictions of various efficiency wage models of employee behavior (including gift-exchange, reciprocity, and reduced shirking), as well as those of a model where effort on pro-social tasks is a normal good with a positive income elasticity, we find that large unconditional increases in salaries of incumbent teachers had no meaningful positive impact on student learning.

Suggested Citation

  • Joppe de Ree & Karthik Muralidharan & Menno Pradhan & Halsey Rogers, 2015. "Double for Nothing? Experimental Evidence on the Impact of an Unconditional Teacher Salary Increase on Student Performance in Indonesia," NBER Working Papers 21806, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:21806
    Note: CH DEV ED LS PE
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    Cited by:

    1. Karthik Muralidharan & Abhijeet Singh & Alejandro J. Ganimian, 2019. "Disrupting Education? Experimental Evidence on Technology-Aided Instruction in India," American Economic Review, American Economic Association, vol. 109(4), pages 1426-1460, April.
    2. Yoga Affandi & Donni Fajar Anugrah & Pakasa Bary, 2019. "Human capital and economic growth across regions: a case study in Indonesia," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 9(3), pages 331-347, September.
    3. Todd Pugatch, 2017. "Is teacher certification an effective tool for developing countries?," IZA World of Labor, Institute of Labor Economics (IZA), pages 349-349, April.
    4. Muralidharan, Karthik & Das, Jishnu & Holla, Alaka & Mohpal, Aakash, 2017. "The fiscal cost of weak governance: Evidence from teacher absence in India," Journal of Public Economics, Elsevier, vol. 145(C), pages 116-135.
    5. Rowena Crawford & Richard Disney, 2018. "Wage Regulation and the Quality of Police Applicants," Economica, London School of Economics and Political Science, vol. 85(340), pages 701-734, October.
    6. Michael Callen & Saad Gulzar & Syed Ali Hasanain & Muhammad Yasir Khan, 2016. "The Political Economy of Public Sector Absence: Experimental Evidence from Pakistan," NBER Working Papers 22340, National Bureau of Economic Research, Inc.
    7. Juan F. Castro & Bruno Esposito, 2017. "The Effect of Teacher Bonuses on Learning Outcomes and the Distribution of Teacher Skill: Evidence from Rural Schools in Peru," Working Papers 2017-104, Peruvian Economic Association.
    8. Juan Saavedra & Dario Maldonado & Lucrecia Santibanez & Luis Omar Herrera Prada, 2017. "Premium or Penalty? Labor Market Returns to Novice Public Sector Teachers," NBER Working Papers 24012, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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