Double for Nothing? Experimental Evidence on an Unconditional Teacher Salary Increase in Indonesia

74 Pages Posted: 8 Dec 2017

See all articles by Joppe Jaitze De Ree

Joppe Jaitze De Ree

World Bank

Karthik Muralidharan

University of California, San Diego (UCSD)

Menno Prasad Pradhan

University of Amsterdam

F. Halsey Rogers

World Bank

Date Written: December 4, 2017

Abstract

How does a large unconditional increase in salary affect the performance of incumbent employees in the public sector? This paper presents experimental evidence on this question in the context of a policy change in Indonesia that led to a permanent doubling of teachers' base salaries. The analysis uses a large-scale, randomized experiment across a representative sample of Indonesian schools that accelerated this pay increase for teachers in treated schools. The findings show that the large pay increase significantly improved teachers'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 increase in pay led to no improvement in student learning outcomes. The effects are precisely estimated, making it possible to rule out even modest positive impacts on test scores. The results suggest that unconditional pay increases are unlikely to be an effective policy option for improving the effort and productivity of incumbent employees in public sector settings.

Keywords: Public Sector Administrative and Civil Service Reform, Democratic Government, Educational Sciences, Rural Labor Markets, Non Governmental Organizations, Economics and Institutions, Public Sector Administrative & Civil Service Reform, De Facto Governments, Public Sector Management and Reform

Suggested Citation

De Ree, Joppe Jaitze and Muralidharan, Karthik and Pradhan, Menno Prasad and Rogers, F. Halsey, Double for Nothing? Experimental Evidence on an Unconditional Teacher Salary Increase in Indonesia (December 4, 2017). World Bank Policy Research Working Paper No. 8264. Available at SSRN: https://ssrn.com/abstract=3082630

Joppe Jaitze De Ree (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Karthik Muralidharan

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

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

Menno Prasad Pradhan

University of Amsterdam ( email )

Spui 21
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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