The Dynamic Effects of Educational Accountability
Duke University - Department of Economics
March 1, 2013
Economic Research Initiatives at Duke (ERID) Working Paper No. 126
This paper devises a new test for ratchet effects in an educational setting. Extending earlier dynamic moral hazard models from an infinite to a finite horizon, I show that dynamic incentives depend crucially on the horizon schools face: intuitively, teachers distort their effort less when their decision affects fewer future scores within the same school. I then exploit grade span variation to credibly identify the extent of dynamic gaming using rich educational data from North Carolina, where the state accountability system features school-level targets that condition on the average prior test score of students. I find compelling evidence of dynamic effects based on a triple-differences approach that controls for differentially trending unobservables across schools. The estimated distortions are significant, ranging between 3.9% and 5.9% of a standard deviation in the grade five score. Further evidence indicates that these effects are primarily driven by distortions in classroom effort, with re-sorting of teachers across grades serving as an important secondary channel. Of relevance to a broad class of incentive schemes, my findings indicate that nontrivial distortions are likely to arise when future targets are manipulable, a fact policymakers should be cognizant of when designing such schemes.
Number of Pages in PDF File: 61
Keywords: Dynamic Gaming, Dynamic Incentives, Ratchet Effects, Educational Accountability, Education Production
JEL Classification: D82, I21, J24, J33, M52working papers series
Date posted: March 4, 2012 ; Last revised: March 10, 2013
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