IDEAS home Printed from https://ideas.repec.org/p/uwo/hcuwoc/20178.html
   My bibliography  Save this paper

The Potential Output Gains from Using Optimal Teacher Incentives: An Illustrative Calibration of a Hidden Action Model

Author

Abstract

This note examines the potential output gains from the implementation of optimal teacher incentive pay schemes, by calibrating the Holmstrom and Milgrom (1987) hidden action model using data from Muralidharan and Sundararaman (2011), a teacher incentive pay experiment implemented in Andhra Pradesh, India. Findings suggest that the introduction of optimal individual incentive-pay schemes could result in very large increases in output, about six times the size of the (significant) results obtained in the experiment.

Suggested Citation

  • Nirav Mehta, 2017. "The Potential Output Gains from Using Optimal Teacher Incentives: An Illustrative Calibration of a Hidden Action Model," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20178, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    • Handle: RePEc:uwo:hcuwoc:20178
    as

    Download full text from publisher

    File URL: https://ir.lib.uwo.ca/cgi/viewcontent.cgi?article=1123&context=economicscibc
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Steven G. Rivkin & Eric A. Hanushek & John F. Kain, 2005. "Teachers, Schools, and Academic Achievement," Econometrica, Econometric Society, vol. 73(2), pages 417-458, March.
    2. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760, December.
    3. Babcock, Bruce A. & Choi, E. Kwan & Feinerman, Eli, 1993. "Risk And Probability Premiums For Cara Utility Functions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(1), pages 1-8, July.
    4. Scott A. Imberman & Michael F. Lovenheim, 2015. "Incentive Strength and Teacher Productivity: Evidence from a Group-Based Teacher Incentive Pay System," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 364-386, May.
    5. Thomas Dohmen & Armin Falk, 2010. "You Get What You Pay For: Incentives and Selection in the Education System," Economic Journal, Royal Economic Society, vol. 120(546), pages 256-271, August.
    6. 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.
    7. Dan D. Goldhaber & Dominic J. Brewer, 1997. "Why Don't Schools and Teachers Seem to Matter? Assessing the Impact of Unobservables on Educational Productivity," Journal of Human Resources, University of Wisconsin Press, vol. 32(3), pages 505-523.
    8. Alma Cohen & Liran Einav, 2007. "Estimating Risk Preferences from Deductible Choice," American Economic Review, American Economic Association, vol. 97(3), pages 745-788, June.
    9. Thomas S. Dee & James Wyckoff, 2015. "Incentives, Selection, and Teacher Performance: Evidence from IMPACT," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 34(2), pages 267-297, March.
    10. Hanushek, Eric A., 2011. "The economic value of higher teacher quality," Economics of Education Review, Elsevier, vol. 30(3), pages 466-479, June.
    11. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-328, March.
    12. Gadi Barlevy & Derek Neal, 2012. "Pay for Percentile," American Economic Review, American Economic Association, vol. 102(5), pages 1805-1831, August.
    13. Roland G. Fryer, 2013. "Teacher Incentives and Student Achievement: Evidence from New York City Public Schools," Journal of Labor Economics, University of Chicago Press, vol. 31(2), pages 373-407.
    14. Aaron J. Sojourner & Elton Mykerezi, 2014. "Teacher Pay Reform and Productivity: Panel Data Evidence from Adoptions of Q-Comp in Minnesota," Journal of Human Resources, University of Wisconsin Press, vol. 49(4), pages 945-981.
    15. Carl Nadler & Matthew Wiswall, 2011. "Risk Aversion and Support for Merit Pay: Theory and Evidence from Minnesota's Q Comp Program," Education Finance and Policy, MIT Press, vol. 6(1), pages 75-104, January.
    16. Peter Z. Schochet & Hanley S. Chiang, "undated". "What Are Error Rates for Classifying Teacher and School Performance Using Value-Added Models?," Mathematica Policy Research Reports 8cc459dd9c574c3d832ed4182, Mathematica Policy Research.
    17. Jones, Michael D., 2013. "Teacher behavior under performance pay incentives," Economics of Education Review, Elsevier, vol. 37(C), pages 148-164.
    18. 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.
    19. Friend, Irwin & Blume, Marshall E, 1975. "The Demand for Risky Assets," American Economic Review, American Economic Association, vol. 65(5), pages 900-922, December.
    20. Michael Kremer & Nazmul Chaudhury & F. Halsey Rogers & Karthik Muralidharan & Jeffrey Hammer, 2005. "Teacher Absence in India: A Snapshot," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 658-667, 04/05.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nirav Mehta, 2019. "Measuring quality for use in incentive schemes: The case of “shrinkage” estimators," Quantitative Economics, Econometric Society, vol. 10(4), pages 1537-1577, November.
    2. Michela M. Tincani, 2021. "Teacher labor markets, school vouchers, and student cognitive achievement: Evidence from Chile," Quantitative Economics, Econometric Society, vol. 12(1), pages 173-216, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Audra J. Bowlus & Eda Bozkurt & Lance Lochner, 2017. "Wages and Employment: The Canonical Model Revisited," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20179, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    2. Nirav Mehta, 2019. "Measuring quality for use in incentive schemes: The case of “shrinkage” estimators," Quantitative Economics, Econometric Society, vol. 10(4), pages 1537-1577, November.
    3. Berlinski, Samuel & Ramos, Alejandra, 2020. "Teacher mobility and merit pay: Evidence from a voluntary public award program," Journal of Public Economics, Elsevier, vol. 186(C).
    4. Brehm, Margaret & Imberman, Scott A. & Lovenheim, Michael F., 2017. "Achievement effects of individual performance incentives in a teacher merit pay tournament," Labour Economics, Elsevier, vol. 44(C), pages 133-150.
    5. Johnston, Andrew C., 2021. "Preferences, Selection, and the Structure of Teacher Pay," IZA Discussion Papers 14831, Institute of Labor Economics (IZA).
    6. Scott A. Imberman, 2015. "How effective are financial incentives for teachers?," IZA World of Labor, Institute of Labor Economics (IZA), pages 158-158, June.
    7. Nirav Mehta, 2014. "Targeting the Wrong Teachers: Estimating Teacher Quality for Use in Accountability Regimes," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20143, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    8. Koedel, Cory & Mihaly, Kata & Rockoff, Jonah E., 2015. "Value-added modeling: A review," Economics of Education Review, Elsevier, vol. 47(C), pages 180-195.
    9. 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.
    10. Clare Leaver & Owen Ozier & Pieter Serneels & Andrew Zeitlin, 2021. "Recruitment, Effort, and Retention Effects of Performance Contracts for Civil Servants: Experimental Evidence from Rwandan Primary Schools," American Economic Review, American Economic Association, vol. 111(7), pages 2213-2246, July.
    11. Figlio, D. & Karbownik, K. & Salvanes, K.G., 2016. "Education Research and Administrative Data," Handbook of the Economics of Education,, Elsevier.
    12. Hanley Chiang & Cecilia Speroni & Mariesa Herrmann & Kristin Hallgren & Paul Burkander & Alison Wellington, "undated". "Evaluation of the Teacher Incentive Fund: Final Report on Implementation and Impacts of Pay-for-Performance Across Four Years," Mathematica Policy Research Reports 568955b06a2a4b11b954dded8, Mathematica Policy Research.
    13. Samuel Berlinski & Norbert Schady, 2015. "Daycare Services: It’s All about Quality," Palgrave Macmillan Books, in: Samuel Berlinski & Norbert Schady (ed.), The Early Years, chapter 4, pages 91-119, Palgrave Macmillan.
    14. Yeşilırmak, Muharrem, 2019. "Bonus pay for teachers, spatial sorting, and student achievement," European Journal of Political Economy, Elsevier, vol. 59(C), pages 129-158.
    15. Liebowitz, David D., 2021. "Teacher evaluation for accountability and growth: Should policy treat them as complements or substitutes?," Labour Economics, Elsevier, vol. 71(C).
    16. M. Caridad Araujo & Yyannu Cruz-Aguayo & Analia Jaimovich & Sharon Lynn Kagan, 2015. "Drawing Up an Institutional Architecture," IDB Publications (Book Chapters), in: Samuel Berlinski & Norbert Schady (ed.), The Early Years: Child Well-Being and the Role of Public Policy, edition 1, chapter 7, pages 179-202, Inter-American Development Bank.
    17. Isaac Mbiti & Mauricio Romero & Youdi Schipper, 2023. "Designing Effective Teacher Performance Pay Programs: Experimental Evidence from Tanzania," The Economic Journal, Royal Economic Society, vol. 133(653), pages 1968-2000.
    18. J. Oriol Escardíbul & Simon Burgess & Oscar D. Marcenaro Gutiérrez & Helen F. Ladd & Lucy Sorensen, 2017. "Effects of teacher quality on student achievement / Impacto de la calidad del profesorado en el rendimiento académico de los estudiantes / Impacte de la qualitat del professorat en el rendiment acadèm," IEB Reports ieb_report_2_2017, Institut d'Economia de Barcelona (IEB).
    19. Barrera-Osorio, Felipe & Raju, Dhushyanth, 2017. "Teacher performance pay: Experimental evidence from Pakistan," Journal of Public Economics, Elsevier, vol. 148(C), pages 75-91.
    20. Andrea Lepine, 2016. "Teacher Incentives and Student Performance: Evidence from Brazil," Working Papers, Department of Economics 2016_18, University of São Paulo (FEA-USP).

    More about this item

    Keywords

    Hidden Action; Empirical Contracts; Teacher Incentive Pay;
    All these keywords.

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J4 - Labor and Demographic Economics - - Particular Labor Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uwo:hcuwoc:20178. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://nest.uwo.ca/chcp/research/working_papers.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.