Working Paper: NBER ID: w10622
Authors: Victor Lavy
Abstract: 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.
Keywords: performance pay; teachers; incentives; student achievement; education economics
JEL Codes: I21; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| performance pay program for teachers (J33) | changes in teaching methods (A21) |
| performance pay program for teachers (J33) | increased afterschool teaching (A21) |
| performance pay program for teachers (J33) | heightened responsiveness to students' needs (I24) |
| performance pay program for teachers (J33) | unethical grading practices (A19) |
| performance pay program for teachers (J33) | student achievements in English (A29) |
| performance pay program for teachers (J33) | student achievements in mathematics (C02) |
| performance pay program for teachers (J33) | matriculation rate in mathematics (C19) |
| performance pay program for teachers (J33) | matriculation rate in English (Y40) |