‘Loss Aversion,’ Teacher Bonuses and Student Performance
Wall Street Journal, July 27, 2012
Here’s a new twist on teacher bonuses that may produce better results than the standard approach: Give instructors the bonuses at the start of the school year but yank them back if students underperform. (The current economics literature finds that standard bonuses are effective in poor countries where teacher absenteeism is a serious problem — bonuses get them to at least show up — but in the United States so far researchers have turned up little evidence they do much.)
In an experiment described in a new National Bureau of Economic Research paper, 150 teachers in nine poor K-8 schools in Chicago Heights, Illinois took part in the experiment. One group of teachers got $4,000 in a lump sum at the start of the school year, but were told they’d lose some of all of it if their students did not improve sufficiently. (They could get more, up to $8,000, for exceptional performance.) The other group was simply offered a traditional bonus, also $4,000, payable at the end of the year. (That figure could also grow).