Inducing Positive Sorting through Performance Pay: Experimental Evidence from Pakistani Schools (Job Market Paper) - Draft Coming Soon
with Tahir Andrabi
Abstract: Attracting and retaining high-quality teachers has a large social benefit, but it is challenging for schools to identify good teachers ex-ante. This study uses teachers’ contract choices and a randomized controlled trial of performance pay with 7,000 teachers in 243 private schools in Pakistan to study whether performance pay can attract and retain higher-quality teachers. Consistent with adverse selection models, we find that performance pay can induce positive sorting: both high value-added teachers and teachers who respond more strongly to incentives significantly prefer performance pay and sort into these schools. Using two additional treatments, we show effects are more pronounced among teachers with more information about their quality and teachers with lower switching costs. Teachers have considerably more information about their quality than their principal, and this holds throughout most of their tenure. If we take into account these sorting effects, the total effect of performance pay on test scores is twice as large as if we just measured the direct effects on the existing stock of teachers, suggesting we may have significantly underestimated the benefits.
Subjective versus Objective Incentives and Employee Productivity
with Tahir Andrabi
Abstract: A central challenge facing organizations is how to incentivize employees. While high-powered incentives can motivate effort, they can lead employees to distort effort away from non-incentivized outcomes. This is one reason why most performance incentives allow for manager subjectivity. However, this subjectivity can introduce new concerns, including favoritism and bias. We study the effect of subjective versus objective performance incentives on employee productivity using a randomized controlled trial in 234 Pakistani private schools. We estimate the effect of two performance raise treatments versus a control condition, in which all teachers receive the same raise. The first treatment arm is a “subjective” raise, in which principals evaluate teachers; the second treatment arm an “objective” raise based on student test scores. First, we show that both subjective and objective incentives are equally effective at increasing test scores. However, objective incentives decrease student socio-emotional development. Second, we show that these effects are likely driven by the types of behavior change we observe from teachers during classroom observations. In objective schools, teachers spend more time on test preparation and use more punitive discipline, whereas, in subjective schools, pedagogy improves. Finally, we investigate the mechanisms of these effects through the lens of a moral hazard model with multi-tasking. We exploit variation within each treatment to isolate the causal effect of contract noisiness and distortion on student outcomes. We then show that teachers perceive subjective incentives as less noisy and less distorted, and these contract features affect student outcomes, serving as key channels to explain the reduced form effects we see.
Attention as Human Capital
with Supreet Kaur, Geeta Kingdon and Heather Schofield
Abstract: Cognitive capacity—a key predictor of labor productivity—has traditionally been viewed as a fixed component of human capital. This project reexamines this view by testing whether attentional ability is endogenously shaped through one's socio-economic environment. We focus on a specific dimension of attention: the ability to sustain focus toward a task. We first document a novel fact: lower-income individuals exhibit larger attentional declines than more affluent ones across disparate field settings in both rich and poor countries—school tests, worker productivity, voting—and these declines help explain performance differences among the rich and poor. Next, through a field experiment with 1,650 low-income Indian primary school students, we increase the time devoted to focused cognitive activity during the school day, using either math or non-academic content. Each of these interventions improves the ability to sustain focus across a variety of unrelated domains—academic performance, listening retention, and IQ, as well as on traditional attentional ability measures—indicating that our interventions affected an underlying core resource. In addition, the interventions improve performance on school administered tests in core subjects. Our findings suggest that worse schooling environments may disadvantage poor children by hampering the development of cognitive capacity.