Incentive Design in Education: An Empirical Analysis
While incentive schemes to elicit greater effort in organizations are widespread, the incentive strength-effort mapping is difficult to ascertain in practice, hindering incentive design. We propose a new semi-parametric method for uncovering this relationship in an education context, using exogenous incentive variation and rich administrative data. The estimated effort response forms the basis of a counterfactual approach tracing the effects of various accountability systems on the full distribution of scores. We show higher average performance comes with greater score dispersion for a given accountability scheme, and that incentive designs not yet enacted can improve performance further, relevant to education reform.
We would like to thank Joseph Altonji, Peter Arcidiacono, David Deming, Giacomo De Giorgi, David Figlio, Caroline Hoxby, Lisa Kahn, Lance Lochner, Rich Romano, Eduardo Souza-Rodrigues, Aloysius Siow, and seminar participants at Duke University, University of Florida, NBER, SITE, University of Western Ontario, and Yale University for helpful comments and suggestions. Thanks also to Hammad Shaikh for excellent research assistance. Financial support from the University of Toronto is gratefully acknowledged. All remaining errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.