We propose an incentive pay scheme for educators that links educator compensation to the ranks of their students within appropriately defined comparison sets, and we show that under certain conditions our scheme induces teachers to allocate socially optimal levels of effort to all students....

We propose an incentive pay scheme for educators that links educator compensation to the ranks of their students within appropriately defined comparison sets, and we show that under certain conditions our scheme induces teachers to allocate socially optimal levels of effort to all students....

Many test-based accountability systems, including the No Child Left Behind Act of 2001 (NCLB), place great weight on the numbers of students who score at or above specified proficiency levels in various subjects. Accountability systems based on these metrics often provide incentives for teachers...