@techreport{NBERw10622,
 title = "Performance Pay and Teachers' Effort, Productivity and Grading Ethics",
 author = "Victor Lavy",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "10622",
 year = "2004",
 month = "July",
 URL = "http://www.nber.org/papers/w10622",
 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.},
}