Double for Nothing? Experimental Evidence on the Impact of an Unconditional Teacher Salary Increase on Student Performance in Indonesia

61 Pages Posted: 20 Jan 2016 Last revised: 31 Jan 2021

See all articles by Joppe de Ree

Joppe de Ree

World Bank; Asian Development Bank

Karthik Muralidharan

University of California, San Diego (UCSD)

Menno Prasad Pradhan

Vrije Universiteit Amsterdam, School of Business and Economics; University of Amsterdam - Faculty of Economics and Business (FEB)

F. Halsey Rogers

World Bank

Date Written: December 2015

Abstract

How does a large unconditional increase in salary affect employee performance in the public sector? We present the first experimental evidence on this question in the context of a unique policy change in Indonesia that led to a permanent doubling of base teacher salaries. Using a large-scale randomized experiment across a representative sample of Indonesian schools that accelerated this doubling of pay for teachers in treatment schools, we find that the doubling of pay significantly improved teacher satisfaction with their income, reduced the incidence of teachers holding outside jobs, and reduced self-reported financial stress. Nevertheless, after two and three years, the doubling in pay led to no improvements in measures of teacher effort, and had no impact whatsoever on student learning outcomes. Thus, contrary to the predictions of various efficiency wage models of employee behavior (including gift-exchange, reciprocity, and reduced shirking), as well as those of a model where effort on pro-social tasks is a normal good with a positive income elasticity, we find that large unconditional increases in salaries of incumbent teachers had no meaningful positive impact on student learning.

Suggested Citation

de Ree, Joppe and Muralidharan, Karthik and Pradhan, Menno and Rogers, F. Halsey, Double for Nothing? Experimental Evidence on the Impact of an Unconditional Teacher Salary Increase on Student Performance in Indonesia (December 2015). NBER Working Paper No. w21806, Available at SSRN: https://ssrn.com/abstract=2717277

Joppe De Ree (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
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Philippines

Karthik Muralidharan

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States

Menno Pradhan

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31(0)20 444 6137 (Phone)
+31(0)20 444 6127 (Fax)

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

F. Halsey Rogers

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/hrogers

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