Teacher Performance Pay: Two-Year Study Shows It Works

Karthik Muralidharan and Venkatesh Sundararaman provide evidence on the power of teacher incentives to increase learning.

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We find that the teacher performance pay program was highly effective in improving student learning. At the end of two years of the program, students in incentive schools performed significantly better than those in comparison schools by 0.28 and 0.16 standard deviations (SD) in math and language tests respectively....

We find no evidence of any adverse consequences as a result of the incentive programs. Incentive schools do significantly better on both mechanical components of the test (designed to reflect rote learning) and conceptual components of the test (designed to capture deeper understanding of the material),suggesting that the gains in test scores represent an actual increase in learning outcomes. Students in incentive schools do significantly better not only in math and language (for which there were incentives), but also in science and social studies (for which there were no incentives), suggesting positive spillover effects....

School-level group incentives and teacher-level individual incentives perform equally well in the first year of the program, but the individual incentive schools significantly outperformed the group incentive schools in the second year....

We find that performance-based bonus payments to teachers were a significantly more cost effective way of increasing student test scores compared to spending a similar amount of money unconditionally on additional schooling inputs."