NCPA - National Center for Policy Analysis


June 21, 2007

Despite the growing interest in merit pay for teachers in American schools, the first U.S. evidence of a positive correlation between student test scores and financial incentive systems that reward individual teachers appears in "Individual Teacher Incentives and Student Performance," by David Figlio and Lawrence Kenny.

Figlio and Kenny surveyed school personnel practices in 502 schools across the country in 2000.  According to the researchers, non-unionized schools were more than twice as likely to offer teacher incentive programs.  The schools in the sample also were classified by whether they either fired or encouraged the resignation of at least one or more experienced teachers in the last three academic years.

The authors find:

  • Catholic schools were "more than twice as likely" as the public schools to dismiss novice teachers and were more than three times as likely to fire experienced teachers; otherwise, they were indistinguishable from the public schools.
  • Non-Catholic private schools were different from the public schools in nearly "every measured dimension of teacher incentives."

Figlio and Kenny find that teacher salary incentives are associated with higher levels of student performance.  They cannot be certain whether the test score improvement is driven by teacher incentives or whether the incentives are proxy variables for unobserved school quality. 

In general, they find:

  • Teacher salary incentives are associated with a 1.3 to 2.1 point rise in test scores, about the same increase associated with increasing maternal education by three years.
  • The correlation exists in schools with predominantly low- and middle-income students.
  • Incentive programs that awarded bonuses to very large fractions of teachers were not correlated with higher student achievement.

Source: Linda Gorman, "Teacher Incentives and Student Performance," NBER Digest, June 2007; based upon: "Individual Teacher Incentives And Student Performance," David N. Figlio and Lawrence Kenny, National Bureau of Economic Research, Working Paper No. 12627, October 2006.

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