Description:

"Teacher Quality Policy When Supply Matters" by Jesse Rothstein, Associate Professor of Public Policy and Economics, University of California, Berkeley

Abstract: Many districts, encouraged by the U.S. Department of Education, are moving to implement new teaching contracts that provide bonuses to effective teachers and/or allow for the removal of ineffective teachers. An important hoped-for mechanism is self-selection—these policies should make teaching more attractive to those who are effective and less attractive to those who are not. But extant models of the selection effects are extremely simplistic. Rothstein develops a model of the teacher labor market, incorporating self-selection through entry and voluntary exit, noisy performance measurement, Bayesian learning, risk aversion, and on-the-job search. He then uses this model to study the effects of alternative contracts on teaching effectiveness and on the teacher wage bill. Simulations with reasonable parameter values indicate that both performance pay and firing policies can raise student achievement, albeit at significant cost. Accounting for labor market interactions makes each policy notably less attractive than when these interactions are ignored.

This is part of the Economics/IPR Applied Micro and Labor & Education Policy Joint Seminar Series.