Group Incentives for Teachers: The Impact of the NYC School-Wide Bonus Program on Educational Outcomes

In current debates regarding the future of education, teacher compensation schemes are often criticized for their lack of performance-based pay. Proponents of merit pay for teachers argue that tying teacher salaries to student achievement will induce teachers to focus on the success of their students and stimulate innovation in the school system as a whole. In this paper, we use a randomized policy experiment conducted in the New York City public school system to explore the effects of one group-based pay scheme. We investigate potential impacts of incentive pay over two academic years (2007-2008 and 2008-2009) on student performance on annual math and reading exams, teacher absences, and responses to environmental surveys of teachers and students. We also consider whether the program had differential outcomes on groups within schools that were especially likely to be targeted, given the particular incentive structure of the program. Last, we explore relative impacts on the market for teachers by examining end-of-year teacher turnover and the quality composition of newly hired teachers. In general, we find no significant effects of this program. However, there is some evidence that the program reduced teacher absenteeism in schools with a small number of teachers, and that these effects were weakened in larger schools by the presence of free-riding.