No abstract

Over the last decade many districts have implemented performance pay incentives to reward teachers for improving student test scores. Economic theory suggests that these programs could alter teacher work effort, cooperation, and retention. Because teachers can choose to work in a performance pay district that has characteristics correlated with teacher behavior, I use the distance between a teacher's undergraduate institution and the nearest performance pay district as an instrumental variable. Using data from the 2003 and 2007 waves of the Schools and Staffing Survey (SASS), I find that teachers respond to performance pay incentives by working fewer hours per week at school. Performance pay also decreases participation in unpaid cooperative school activities, while there is suggestive evidence that teacher turnover decreases. The treatment effects are heterogeneous; male teachers respond more positively to performance pay than female teachers. In Florida, which restricts state performance pay funding to individual teachers or teams, I find that work effort and teacher turnover increase. JEL Classifications: I21, I28, J33, M5

No abstract

Pay for performance ( PFP) remains one of the most controversial policy debates in the New Public Management reform era. Skepticism about PFP in the public sector is often grounded in theories of public service motivation that suggest a misalignment between PFP's focus on extrinsic market-based pay incentives and intrinsically motivated government workers. Frequently missing from this analysis, however, is any consideration for whether PFP leads to positive "sorting" effects on the composition of a government agency's workforce through attraction, selection, and attrition processes. Using data from two waves of the Schools and Staffing Survey, the authors examine whether PFP influences the sorting patterns of K-12 public schoolteachers across U.S. school districts. Findings show that, on average, school districts that adopted PFP secured new teacher hires who had graduated from colleges and universities with average SAT scores that were about 30 points higher than the new teacher cohorts hired by districts that did not adopt PFP. Practitioner Points• Public sector employers should give greater consideration to how compensation policies such as pay for performance (PFP) affect the attraction, selection, and attrition of the employees they desire to recruit and retain. • PFP programs can also influence the quality of prospective employees that a public agency is able to attract and hire. • PFP programs not only appear to influence the sorting patterns of prospective (early-career) employees but also are associated with the sorting of higher-quality veteran employees.

No abstract