Pay for Locally Monitored Performance? A Welfare Analysis for Teacher Attendance in Ugandan Primary Schools

49 Pages Posted: 16 Aug 2016

See all articles by Jacobus Cilliers

Jacobus Cilliers

University of Oxford

Ibrahim Kasirye

Economic Policy Research Centre, Uganda

Clare Leaver

University of Oxford

Pieter M. Serneels

University of Oxford - Centre for the Study of African Economies (CSAE)

Andrew Zeitlin

Georgetown University

Multiple version iconThere are 2 versions of this paper

Abstract

Public sector organizations often rely on reports by local monitors that are costly to verify and that serve twin objectives: to incentivize agent performance, and to provide information for planning purposes. Received wisdom has it that pay for locally monitored performance (P4LMP) will result in collusion and undermine both objectives. But simple Coasian logic suggests the reverse: P4LMP puts transferable money on the table and may enable interested parties to bargain to a more efficient outcome. This paper develops a theoretical model that shows why, and for which parameters, the welfare-enhancing Coasian scenario exists. Focusing on education, we model how the preferences of a teacher (agent) and head-teacher (local monitor) affect actual and reported teacher attendance, and how these equilibrium outcomes depend on the financial stakes attached to reports. To capture the value of information, we also consider the welfare of a bureaucracy that makes a costly policy mistake when holding the wrong belief about teacher performance. We test the model and estimate the predicted effects using data from a field experiment in Ugandan primary schools, randomly varying whether head teachers' reports of teacher attendance are tied to bonus payments or not.Consistent with Coasian logic, P4LMP increased actual and reported teacher attendance (by 9 and 15 percentage points respectively) and reduced policy mistakes (by 7 percentage points) relative to unincentivized local monitoring. We use these experimental impacts to undertake a detailed cost-benefit analysis and conclude, even under conservative assumptions, that welfare improved when paying for locally monitored performance.

Keywords: public sector, monitoring, performance pay

JEL Classification: D61, H52, I25, I26

Suggested Citation

Cilliers, Jacobus and Kasirye, Ibrahim and Leaver, Clare and Serneels, Pieter M. and Zeitlin, Andrew, Pay for Locally Monitored Performance? A Welfare Analysis for Teacher Attendance in Ugandan Primary Schools. IZA Discussion Paper No. 10118. Available at SSRN: https://ssrn.com/abstract=2822657

Jacobus Cilliers (Contact Author)

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Ibrahim Kasirye

Economic Policy Research Centre, Uganda ( email )

Plot 51 Pool Road
PO Box 7841
Kampala
Uganda

Clare Leaver

University of Oxford ( email )

Department of Economics
Manor Road Building
Oxford, Oxfordshire OX1 3UQ
United Kingdom
44(0)1865 271952 (Phone)

Pieter M. Serneels

University of Oxford - Centre for the Study of African Economies (CSAE) ( email )

Oxford OX1 3UL
United Kingdom

Andrew Zeitlin

Georgetown University ( email )

Washington, DC 20057
United States

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