Individual Teacher Incentives, Student Achievement and Grade Inflation

37 Pages Posted: 17 Mar 2009

See all articles by Pedro S. Martins

Pedro S. Martins

Queen Mary College - School of Business and Management; IZA Institute of Labor Economics; New University of Lisbon


How do teacher incentives affect student achievement? We contribute to this question by examining the effects of the recent introduction of teacher performance-related pay and tournaments in Portugal's public schools. Specifically, we draw on matched student-school panel data covering the population of secondary school national exams over seven years. We then conduct a difference-in-differences analysis based on two complementary control groups: public schools in two autonomous regions that were exposed to lighter versions of the reform than in the rest of the country; and private schools, which are also subject to the same national exams but whose teachers were not affected by the reform. Our results consistently indicate that the increased focus on individual teacher performance caused a significant decline in student achievement, particularly in terms of national exams. The triple-difference results also document a significant increase in grade inflation.

Keywords: performance-related pay, public sector, matched school-student data

JEL Classification: I21, M52, I28

Suggested Citation

Martins, Pedro S., Individual Teacher Incentives, Student Achievement and Grade Inflation. IZA Discussion Paper No. 4051. Available at SSRN:

Pedro S. Martins (Contact Author)

Queen Mary College - School of Business and Management ( email )

Mile End Road
London, E1 4NS
United Kingdom


IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072

New University of Lisbon

Lisbon, 1099-085

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