The ability to recruit, elicit effort from, and retain civil servants is a central challenge of state capacity in developing countries. Nowhere is this more evident than in the education sector, where rising access to government schooling has failed to translate into hoped-for learning gains, even as teacher salaries account for the bulk of expenditure on education and a large part of the civil service payroll (Das et al, 2017). Many developing country governments obtain poor skill and effort levels in return for their expenditure on the teaching workforce: for example, the World Bank's Service Delivery Indicators for Uganda suggests that only 20 percent of primary school teachers have mastery of their content, while they are absent from school an average of 27 percent of the time (Wane and Martin 2013).
Despite growing evidence of the contractual determinants of effort among existing teachers, little is known about how to select the best staff. Hanushek and Rivkin (2006) highlight that teacher quality is only weakly predicted by formal qualifications and other ex-ante observable characteristics. This leaves open the question of whether incentive contracts might not only elicit effort on the job, but also attract more skilled and intrinsically motivated teachers. Lazear (2003) and Rothstein (2015) argue that performance contracts may be a cost effective means to attract high quality teachers, but to date there exists no experimental evidence on these labor-market effects of performance pay among teachers, or, for that matter, other civil servants in developing or developed countries.
To state our research questions, we sketch a simple framework that underpins our intervention. The production function for student learning depends on, inter alia, two teacher characteristics: skill (pre-determined) and effort (a strategic choice). Teacher utility is decreasing in effort and increasing in both money income and student learning. We refer to the relative importance of student learning in this utility function as a teacher’s intrinsic motivation.
This project seeks to evaluate not only the incentive effect (on effort) but also the selection effects (on skill and intrinsic motivation) of pay-for-performance (P4P) contracts. We have designed a two-tiered experiment to answer three primary research questions:
1. Can P4P improve teacher performance, and so contribute to student learning gains?
2. How effective are P4P contracts at recruiting effective (skilled and intrinsically motivated) teachers, particularly in rural areas?
3. Do P4P contracts help to retain effective teachers?
The hypothesized link from P4P contracts to the selection of teachers and their effort decisions on the job builds on a principal-agent model. In the simple ‘moral hazard’ variant of this model, P4P improves teacher effort. Richer models allow for selection effects on skill (e.g., Lazear 2000, 2003, Rothstein 2015): P4P is predicted to encourage more highly skilled individuals to join and remain in post. The existence of selection effects on intrinsic motivation is an open question.
These questions are answered through a two-tiered randomized, controlled trial, undertaken in the actual recruitment of civil-service teaching jobs listed for the 2016 school year. Further details are provided below.