Many public school districts are beginning to implement performance pay programs
that provide teachers the opportunity to earn pay bonuses based on measures of teaching
performance. Despite the growing number of districts offering these programs,
we know little about their effects. Theory suggests that performance pay programs
may provide an incentive for teachers to work harder (an effort effect). In addition,
districts offering performance pay may attract teachers with higher average ability (a
selection effect). Empirical work investigating the existence of these effects is mixed
in the case of the effort effect and nonexistent in the case of the selection effect.
This study is the first to attempt to empirically test for the existence of a teacher
selection effect resulting from performance pay programs. I show that the existence
of a selection effect may be revealed in differences in total pay and bonus probabilities
between teachers who self-select into performance pay programs and teachers
who are exogenously assigned. If self-selectors earn a higher expected total pay or
are more likely to earn a bonus than an exogenously assigned teacher, I show that
this implies that self-selectors are higher ability teachers on average. I test for this
difference in cross-sectional data from the Schools and Staffing Survey (SASS) and in
longitudinal data from a single performance pay district in Minnesota. In each case,
I fail to find evidence of a selection effect. In the cross-sectional analysis, I find that
while self-selectors earn a higher expected total pay, they are also less likely to earn
a performance bonus. In the longitudinal analysis, I find that teachers who joined a
district in the few years prior to its adoption of performance pay are not measurably
different from teachers who joined in the years after adoption. Post performance pay
joiners are not measurably different in terms of their education, experience, or likelihood
of earning a performance bonus. While I fail to find evidence of a selection
effect, that should not be taken as proof that performance pay programs, in general,
do not produce their advertised benefits. The SASS analysis relies on several strong
assumptions that potentially undermine the credibility of the results. For the analysis
of the performance pay district in Minnesota, this study’s inability to find evidence
of a selection effect is likely a result of the district’s high relative base compensation
and nearly guaranteed bonus award.
University of Minnesota Ph.D. dissertation. July 2011. Major: Applied Economics. Advisor: Morris M. Kleiner. 1 computer file (PDF); vi, 129 pages, appendix p. 117-129.
Hendricks, Matthew D..
Performance pay and teacher selection: do performance pay programs attract higher-ability teachers?.
Retrieved from the University of Minnesota Digital Conservancy,
Content distributed via the University of Minnesota's Digital Conservancy may be subject to additional license and use restrictions applied by the depositor.