Inducing Positive Selection through Performance Pay: Experimental Evidence from Pakistani Schools (Joint with Christina Brown)
Attracting and retaining high-quality teachers has a large social benefit, but it is challenging for schools to identify good teachers ex-ante. This paper uses teachers’ contract choices and a randomized controlled trial of performance pay with 7,000 teachers in 243 private schools in Pakistan to study whether performance pay affects the composition of teachers. Consistent with adverse selection models, we find that performance pay induces positive sorting: both among teachers with higher latent ability and among those with a more elastic effort response to incentives. Teachers also have better information about these dimensions of type than their principals. Using two additional treatments, we show effects are more pronounced among teachers with better information about their quality and teachers with lower switching costs. Accounting for these sorting effects, the total effect of performance pay on test scores is twice as large as the direct effect on the existing stock of teachers, suggesting that analyses that ignore sorting effects may substantially understate the effects of performance pay.
Subjective versus Objective Incentives and Employee Productivity (Joint with Christina Brown)
A central challenge facing firms is how to incentivize employees. While objective, outputbased incentives may be theoretically ideal, in practice they may lead employees to reduce effort on non-incentivized outcomes and may fail in settings where effort is weakly tied to output. We study the effect of subjective incentives (manager-discretionary performance evaluation) and objective incentives (test score-based) relative to no incentives for teachers using an RCT in 230 Pakistani schools. First, we show that subjective and objective incentives both increase test scores and have similar magnitude effects. However, objective incentives decrease non-test score student outcomes relative to subjective incentives. Second, we show that teachers’ effort response is very different under each scheme, with attendance increasing under subjective and teaching quality decreasing under objective. Finally, we rationalize these effects through the lens of a moral hazard model with multi-tasking. We use within-treatment variation to isolate the causal effect of contract noise and distortion and show that these channels explain most of our reduced form effects.
Responses to Negative Information: Insights from Grade Repetition (Joint with Ethan Matlin and Gabrielle Vasey)
When constructing effective policy, it is important to understand how parents, students, and schools interact with each other to mitigate or intensify negative shocks. Unfortunately, it is rare to have the data and setting necessary to analyze these relationships. In this paper, we use rich matched household-child school panel data from Pakistan to study the dynamics of beliefs, investments, and outcomes of these three agents following a student not being promoted to the next grade. We find that following grade repetition, parents revise downward their expectations, beliefs, and investments. Students are discouraged by the retention, and decrease their beliefs in the value of study effort. Conversely, schools do not play a large role, and teachers have no negative bias towards students who are repeating. Overall, we find negative effects of repetition: repeaters score -0.27 to -0.44 standard deviations worse in math, English, and Urdu and are 7.1 percentage points more likely to drop out than their peers.
Keywords: Education Policy, Achievement, Retention, Parental Investments.