Recruitment, Effort, and Retention Effects of Performance Contracts for Civil Servants: Experimental Evidence from Rwandan Primary Schools

Abstract

This paper reports on a two-tiered experiment designed to separately identify the selection and effort margins of pay for performance (P4P). At the recruitment stage, teacher labor markets were randomly assigned to a “pay-for-percentile” or fixed-wage contract. Once recruits were placed, an unexpected, incentive-compatible, school-level re-randomization was performed so that some teachers who applied for a fixed-wage contract ended up being paid by P4P, and vice versa. By the second year of the study, the within-year effort effect of P4P was 0.16 standard deviations of pupil learning, with the total effect rising to 0.20 standard deviations after allowing for selection. (JEL C93, I21, J23, J33, J41, J45, O15)