Teachers affect student academic achievement more than any other school-based factor. As a result, states and school districts have experimented with incentive pay programs as a twofold strategy to both attract high-quality teachers and boost student performance. Evidence on the effectiveness of this tactic is mixed, but the policies can differ greatly in structure, and little is known about how the design of incentive plans might impact their effectiveness.
Enter a new National Bureau of Economic Research (NBER) study that examines the structure of Houston’s recently implemented incentive pay system, as well as its effect on student achievement.
The researchers analyzed data from grades 3–8 from the Houston Independent School District’s (HISD) merit pay system, ASPIRE (“Accelerating Student Progress, Increasing Results and Expectations”). ASPIRE is designed as a “rank-order tournament,” which rewards top-performing math, reading, language arts, science, and social studies teachers based on their value-added scores (estimates of the effect individual teachers have on student learning over a school year). Under ASPIRE, teachers receive a $3,870 bonus if their students receive value-added scores above the fiftieth percentile; scores above the seventy-fifth percentile result in even larger bumps—up to $7,700 per teacher.
The authors initially hypothesized that teachers who...