Friday, January 2, 2009

Pay For Performance

Efforts to keep kids in school don't work well, so economists are trying paying kids for school. In Texas, they paid for AP tests and found that more kids passed them. In Israel, they paid for passing the exit exam and got more people to do that too. These cash incentives seem to work narrowly for only the item paid out on (no more graduation in Texas) and only for marginal students who are actually capable of meeting the bar. It's also a very behavioral story; the incentives for education appear very large, so high school kids need to have very "uneconomic" preferences to be swayed by small amounts of cash (or signaling and unobservables are biasing every estimate of skills gains very high). I haven't seen any effects of reducing kid's "intrinsic motivation." That doesn't surprise me too much; the people who are "motivated" are often just long term greedy. Why punish the ones who only want cash in the short run?

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