Performance pay and teachers' effort, productivity, and grading ethics

Performance-related pay for teachers is being introduced in many countries, amidst much controversy and opposition from teachers and unions alike.1 The rationale for these programs is the notion that incentive pay may motivate teachers to improve their performance. However, there is little evidence of the effect of changes in teachers' incentives in schools. In this paper, I present evidence from an experimental program that offered teachers bonus payments on thebasis of the performance of their classes in high-school matriculation exams in English and mathematics. The bonus program was structured as a rank-order tournament among teachers, separately by subject. Thus, teachers were rewarded on the basis of their performance relative to other teachers of the same subjects. Two measurements of student achievements were used as indicators of teachers' performance: the pass rate and the average score on each matriculation exam. The total amount awarded in each tournament was predetermined, and individual awards were determined on the basis of rank and an award scale. The main interest in this experiment relates to the effect of the program on teachers' pedagogy and effort, on teacher's productivity as measured by students' achievements, and on teachers' grading ethics.