Economic incentives in education

˙ PREAL Blog

We are pleased to share with you the papers presented at the annual conference of the Program on Education Policy and Governance at Harvard University. This year’s conference,  “Economic Incentives: Do They Work in Education?” brought together a group of internationally renowned scholars to discuss how economic incentives are affecting student achievement throughout the world.

The papers in this conference indicate: first, that various countries have experimented with economic incentives in their school systems (Colombia, Israel, and India, among others); second, that the economic incentives in education have been quite diverse (e.g., merit pay, vouchers, and rewarding student achievement); and finally, that economic incentives have been used at different levels (at the school level, at the teacher level, and even at the student level).

Martin West ([email protected]) & Matthew Chingos ([email protected])

Abstract: We calculated the effectiveness of new elementary school teachers in Florida between 2001-02 and 2005-06, and then compared the attrition and mobility patterns of more and less effective teachers overall and across various types of schools. While we do not find evidence that schools are losing their most effective early career teachers, our data suggests that there is room for schools to raise student achievement and close achievement gaps through policies aimed at retaining only their most effective performers. Discussions of compensation in education should not just treat financial incentives for performance, but should also focus on retention. 

Victor Lavy ([email protected])

Abstract: I examine how financially rewarding individual performance is affected by gender. Math, English and Language (Hebrew or Arabic) teachers in Israel competed against their colleagues on the basis of measured improvements in the academic achievements of their students and were financially rewarded accordingly with bonuses. I find no overall differences in performance of female and male teachers. Female teachers in only female competition groups and female teachers in mixed gender competition groups were equally effective in improving their students’ achievements as a response to the financial incentive. However, large gender differences emerge in teachers’ expectations about success and about the effectiveness of the incentive scheme in improving students’ achievements.

Eric Bettinger ([email protected])

Abstract: This paper attempts to identify the effects of student incentive programs on students’ academic behavior from a pay for performance program which took place in Coshocton, Ohio. Since 2004, the Coshocton City Schools have provided cash payments to students for successful completion of their standardized testing. Students in third, fourth, fifth, and sixth grade who passed district and state-mandated standardized exams are eligible for these rewards. Math scores improved for elementary school students, but we find little evidence that reading, social science, and science test scores changed in  response to the incentive program. While the short-run effects suggest a positive impact of the program, the data have less to say about the long-run impacts of the program. Students’ behavior at the specific discontinuities in the cash incentive program suggests that students may respond to incentives in undesirable ways.

Anders Böhlmark ([email protected]) & Mikael Lindahl ([email protected])

Abstract: This paper evaluates school choice at the compulsory-school level. Sweden in 1992 allocated public funding for privately operated schools in order to give all pupils the option of attending non-public schools free of charge. In many local school markets, this reform led to a significant increase in the quantity of such schools as well as in the share of pupils attending them. We estimate the impact of this increase in private enrolment on short-, medium- and long-term educational outcomes of all pupils. We find that an increase in the private school share induces improved short- and medium-term educational outcomes such as average GPA; however, we do not find any impact on long-term educational outcomes such as university attainment and years of schooling. Overall, we thus find evidence that the 1992 school reform induced higher student achievement at the compulsory and high-school levels, but also higher costs and greater segregation.

Martin R. West ([email protected]) & Ludger Woessmann ([email protected])

Abstract: We show that countries with larger shares of Catholics in 1900 (but without a Catholic state religion) tend to have larger shares of privately operated schools even today. We use this historical pattern as a natural experiment to estimate the effects of contemporary private competition on student achievement. Our estimates suggest that larger historical Catholic shares and larger current private school shares increase average student achievement on the PISA 2003 math, science and reading achievement tests. Our results also show that larger shares of privately operated schools lead to lower total education spending, even after controlling for current Catholic shares.

Armin Falk ([email protected]) & Thomas Dohmen ([email protected])

Abstract: In this paper we analyze the interaction of incentives and worker self-selection, on the education system. Output does not only depend on incentives but also on the composition of the workforce, i.e., employees’ abilities, attitudes and personalities. We find that worker composition is endogenous, due to worker self-selection: Agents with different characteristics feel attracted by different incentives. Therefore, providing incentives in firms or organizations has two important effects, an incentive effect per se and a selection effect. If teachers are genuinely risk averse, introducing incentives may actually not be efficient. Whether the individual characteristics of the newly selected teachers are better or worse for overall outcomes in the education system cannot be answered with our data. It is likely that the effect on work attitude and ability is positive but that there are also potentially negative effects with respect to social preferences.

Adam Booij ([email protected]), Edwin Leuven ([email protected]) & Hessel Oosterbeek ([email protected])

Abstract: Despite generous government student loan conditions in the Netherlands, take-up rates on these loans are low. Some have argued that this is due to limited knowledge about their conditions. We examine the importance of information constraints through an Internet questionnaire where half of the students were given factual information on loan conditions, whereas the other half did not receive such information. Six months later, students who received information have better knowledge about the loan conditions. While there is a large and significantly positive association between knowledge about loan conditions and borrowing, our estimates suggest that this is not a causal effect which would rule out that the low take-up rate is caused by information constraints.

Eric Bettinger ([email protected]), Michael Kremer ([email protected]) & Juan Saavedra ([email protected])

Abstract: We study whether vouchers increase educational productivity or are purely redistributive, benefiting recipients only by allowing them to obtain more desirable peers at the expense of other students, meaning no overall social educational gain from the program. We take advantage of an educational voucher program in Colombia, for which spots were allocated by lottery. We found that lottery winners were less likely to attend academic secondary schools and thus had peers with less desirable observable characteristics. Despite this, lottery winners had better educational outcomes, including higher graduation rates and reading test scores. This suggests that vouchers improved educational outcomes through channels beyond redistribution of desirable peers.

Margaret Raymond ([email protected])

Abstract: The research aim of this study was to determine if the presence of reward programs in charter schools significantly affects the academic outcomes of students. This study examines charter schools’ decisions to use or forego an incentive program to see if the systems enhance academic achievement gains. The analysis shows consistent impact of the programs on state achievement tests in reading. At the same time, there is no evident impact in math. Schools whose personnel are strongly aligned in the view that reward systems are effective fare better than schools where the support is weak or where the adults are less aligned. At the same time, having strong confidence in the effectiveness of a reward system is likely also to improve its impacts by reinforcing the expectations of the adults who employ it with students. Additionally, schools in which there is continuous or near-continuous assessment of student conduct produce larger gains in reading than schools that have reward systems but tally up less frequently. This comparison suggests that when done right, reward systems can produce a jump in learning gains for significantly less resources.

Paul E. Peterson ([email protected]) & Matthew M. Chingos ([email protected])

Abstract: Using individual student test-score data made available by the School District of Philadelphia, we estimated the impact of for-profit and non-profit management on student achievement by tracking the  performance of students in math and reading from 2001 to 2006. After three and four years, the average student at schools managed by for-profit firms learned more in math than would be expected had the schools remained under district management. After four years, students in schools under for-profit management learned, on average, over a year’s worth of math more than those in schools under non-profit management. That difference in impact was statistically significant.

Christian Dustmann ([email protected]), Stephen Machin ([email protected]) & Uta Schoenberg ([email protected])

Abstract: This paper analyzes the evolution of the attainment gap between white British born and ethnic minority pupils throughout compulsory schooling. At the start of school, pupils from most ethnic groups substantially lag behind White British pupils, but these gaps decline for all groups throughout primary and secondary school. Perhaps the most remarkable finding of our analysis is that in England, no group of ethnic minority pupils looses ground relative to white British born pupils. We find that language spoken at home is an important reason for the low achievement of ethnic minority pupils at the beginning of primary school. Importantly, the impact of language on achievement declines as children grow older. Our results draw attention to the possibility that the relative improvement of ethnic minority pupils may be related to teacher incentives to concentrate attention on particular pupils, caused by the publication of school league tables at the end of primary and secondary school.

Geeta G. Kingdon ([email protected]) & Francis Teal ([email protected])

Abstract: This paper examines the relationship between teacher unionization, student achievement and teacher pay using data from private schools in India. We use differences in student marks across subjects to identify within-pupil variation in achievement and find that union membership of the teacher appears to strongly reduce pupil achievement. We assess whether this could be due to the unobservables not controlled for by this procedure and find no evidence for this. We show that union membership substantially raises pay and find that remaining unobservables are unlikely to explain this outcome either. We thus have in this data clear evidence that unions raise cost and reduce student achievement.

Matthew Springer ([email protected]), Dale Ballou ([email protected]) & Art (Xiao) Peng

Abstract: This article presents findings from the first independent, third-party appraisal on the impact of the Teacher Advancement Program (TAP) on student test score gains in mathematics. TAP is a comprehensive school reform model designed to attract highly-effective teachers, improve instructional effectiveness, and elevate student achievement. We estimate the effects of TAP treatment by comparing student test score gains in mathematics in schools that participated in TAP with student test score gains in non-TAP schools. Our findings reveal a positive TAP treatment effect on student test score gains in the elementary grades, with weaker but still positive effects on secondary grades. Our findings are qualified by the lack of information on the fidelity of implementation across TAP schools and on variation in features of TAP programs at the school level.

Marcus A. Winters, Gary W. Ritter ([email protected]), Ryan H. Marsh, Jay P. Greene ([email protected]) & Marc J. Holley ([email protected])

Abstract: This paper studies the impact of providing teachers with bonuses for increasing student academic proficiency. Similar to previous research, we model a teacher’s choice of effort as a labor-leisure tradeoff. However, we recognize that teachers are different from other workers in that they could have some internal motivation to increase productivity and that this “caring” for students could have implications for the impact of performance pay. We then test these predictions using data from a generous  performance pay program in Little Rock, Arkansas. We find that students whose teachers were eligible for performance pay made substantially larger test score gains in math, reading, and language than students taught by untreated teachers. Further, we find a negative relationship between the average performance of a teacher’s students the year before treatment began and the additional gains made after treatment.

Karthik Muralidharan ([email protected]) & Venkatesh Sundararaman (vsunda[email protected])

Abstract: We present results from a randomized evaluation of a teacher incentive program implemented across government-run rural primary schools in the Indian state of Andhra Pradesh. The program provided bonus payments to teachers based on the average improvement of their students’ test scores in independently administered learning assessments. At the end of two years of the program, students in incentive schools performed significantly better than those in control schools in math and language tests.  Incentive schools also performed better on subjects for which there were no incentives. Group and individual incentive schools perform equally well in the first year of the program, but the individual incentive schools significantly outperform in the second year. Incentive schools performed significantly better than other randomly-chosen schools that received additional schooling inputs of a similar value.