Achievement Effects of Individual Performance Incentives in a Teacher Merit Pay Tournament

49 Pages Posted: 28 Sep 2015

See all articles by Margaret O’Rourke

Margaret O’Rourke

Michigan State University

Scott A. Imberman

Michigan State University; Michigan State University - College of Education

Michael Lovenheim

Cornell University - Department of Policy Analysis and Management; National Bureau of Economic Research (NBER)

Date Written: September 2015

Abstract

This paper estimates the effect of the individual incentives teachers face in a teacher-based value-added merit pay tournament on student achievement. We first build an illustrative model in which teachers use proximity to an award threshold to update their information about their own ability, which informs their expected marginal return to effort. The model predicts that those who are closer to an award cutoff in a given year will increase effort and thus will have higher achievement gains in the subsequent year. However, if value-added scores are too noisy, teachers will not respond. Using administrative teacher-student linked data, we test this prediction employing a method akin to the bunching estimator of Saez (2010). Specifically, we examine whether teachers who are proximal to a cutoff in one year exhibit excess gains in test score growth in the next year. Our results show consistent evidence that teachers do not respond to the incentives they face under this program. In line with our model, we argue that a likely reason for the lack of responsiveness is that the value-added measures used to determine awards were too noisy to provide informative feedback about one's ability. This highlights the importance of value-added precision in the design of incentive pay systems.

Suggested Citation

O’Rourke, Margaret and Imberman, Scott Andrew and Lovenheim, Michael, Achievement Effects of Individual Performance Incentives in a Teacher Merit Pay Tournament (September 2015). NBER Working Paper No. w21598. Available at SSRN: https://ssrn.com/abstract=2666365

Margaret O’Rourke (Contact Author)

Michigan State University ( email )

Agriculture Hall
East Lansing, MI 48824-1122
United States

Scott Andrew Imberman

Michigan State University ( email )

East Lansing, MI 48824
United States

Michigan State University - College of Education ( email )

East Lansing, MI
United States

Michael Lovenheim

Cornell University - Department of Policy Analysis and Management ( email )

Ithaca, NY
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
8
Abstract Views
193
PlumX Metrics