When Does Teacher Incentive Pay Raise Student Achievement? Evidence from Minnesota's Q-Comp Program

Abstract

Since 2005, dozens of Minnesota school districts have implemented pay for performance (P4P) plans as part of the state's Quality Compensation (Q-Comp) program. This paper performs the first systematic study of Q-Comp's impact on student achievement, exploiting variation across districts in the timing of participation as well as in the design of districts' P4P plans to study effects on achievement for grades 3 through 8. Results show a consistent zero average effect of Q-Comp participation on both reading and math achievement. However, effects on reading achievement differ depending on the design of the P4P plan. Specifically, districts offering greater rewards for teacher-centered actions or outcomes evidently experienced large gains in reading (0.11 SD per $1,000 bonus) while those offering rewards based on school-wide goals or formal subjective evaluations did not. Gains from specific P4P design features were not consistently evident in math. We also study effects on other outcomes, such as teacher characteristics and parent demand.