Designing Effective Teacher Performance Pay Programs: Experimental Evidence from Tanzania

Abstract

We use a field experiment in Tanzania to compare the effectiveness on learning of two teacher performance pay systems.The first is a Pay for Percentile system (a rank-order tournament).The second rewards teachers based on multiple proficiency thresholds.Pay for Percentile can (under certain conditions) induce optimal effort among teachers, but our threshold system is easier to implement and provides teachers with clearer goals and targets.Both systems improved student test scores.However, the multiple-thresholds system was more effective in boosting student learning and is less costly.