NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Design of Performance Pay in Education

Derek Neal

NBER Working Paper No. 16710
Issued in January 2011
NBER Program(s):   ED   LS

This chapter analyzes the design of incentive schemes in education while reviewing empirical studies that evaluate performance pay programs for educators. Several themes emerge. First, it is difficult to use one assessment system to create both educator performance metrics and measures of student achievement. To mitigate incentives for coaching, incentive systems should employ assessments that vary in both format and item content. Separate no-stakes assessments provide more reliable information about student achievement because they create no incentives for educators to take hidden actions that contaminate student test scores. Second, relative performance schemes are rare in education even though they are more difficult to manipulate than systems built around psychometric or subjective performance standards. Third, assessment-based incentive schemes are mechanisms that complement rather than substitute for systems that promote parental choice, e.g. vouchers and charter schools.

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Document Object Identifier (DOI): 10.3386/w16710

Published: "The Design of Performance Pay in Education," Handbook of Economics of Education. Volume 4. 2011

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