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Teacher Behavior under Performance Pay Incentives

(Economics of Education Review, December 2013)


Abstract: Over the last decade many districts have implemented performance pay incentives to reward teachers for improving student test scores.  Economic theory suggests that these programs could alter teacher work effort, cooperation, and retention.  Because teachers can choose to work in a performance pay district that has characteristics correlated with teacher behavior, I use the distance between a teacher’s undergraduate institution and the nearest performance pay district as an instrumental variable.  Using data from the 2003 and 2007 waves of the Schools and Staffing Survey (SASS), I find that teachers respond to performance pay incentives by working fewer hours per week at school.  Performance pay also decreases participation in unpaid cooperative school activities, while there is suggestive evidence that teacher turnover decreases.  The treatment effects are heterogeneous; male teachers respond more positively to performance pay than female teachers.  In Florida, which restricts state performance pay funding to individual teachers or teams, I find that work effort and teacher turnover increase.


"How do Teachers Respond to Tenure?"

(IZA Journal of Labor Economics, April 2015)


Abstract: I use the 2007 Schools and Staffing Survey to estimate the effect of tenure on K-12 teacher behavior. Estimates are obtained by exploiting the cross-state variation in the probationary period length of novice teachers. I find that in the year that teachers are evaluated for tenure, they spend significantly more of their own money on classroom materials. The teachers also participate more in school committees and extracurricular activities during the evaluation year. After increased activity during the tenure evaluation year, behavior appears to return to the baseline established prior to evaluation.


Working Papers


"Show Who The Money? Does Performance Pay Attract Higher Quality Teachers?" with Michael Hartney (Under Review)


Abstract: Advocates claim that teacher pay-for-performance could improve selection into the teaching profession and therefore raise the overall quality of the American education workforce. However, no research has yet demonstrated a link between performance pay and improved teacher recruitment outcomes. Using data from two waves of the Schools and Staffing Survey (SASS) we exploit change in districts’ teacher compensation policies to estimate the within-district effects of performance pay on teacher selection behavior. We find that, on average, districts that adopted performance pay programs secured new teacher hires that graduated from colleges and universities with average SAT scores that were about 30 points higher than the new teacher cohorts hired by districts that did not adopt performance pay. Importantly, these findings cannot be explained by pre-trend differences in districts’ teacher hiring outcomes prior to the adoption of performance pay. Moreover, these results persist even after accounting for a district’s use of other pay recruitment strategies including: market-based pay, hard-to-staff schools pay, and more generous baseline salaries.


"Regional Job Multipliers" with Lu Yang (Under Review)


Abstract: Job multipliers are often cited as justification for economic development incentives in particular industries. In this paper, we use quarterly, QCEW data for counties in the State of Ohio to estimate the tradable sector’s job multiplier. We find that for each additional job in the tradable sector over a ten year period, there are 1.6 jobs created in the nontradable sector. This multiplier estimate is lower for shorter periods of one and three years. For the manufacturing sector specifically, we find the multiplier effect to be 1.2 jobs in the nontradable sector over a ten year period. We also provide evidence that the job multiplier varies over time. During the recessionary period of 2008 and 2009, the job multiplier appears lower compared to the time period preceding and proceeding the recession.


"Crime Reduction and Job Readiness Programs" (Under Review)


Abstract: In this paper, I find that Cincinnati Works members are nine percentage points less likely to be charged with a felony compared to non-Cincinnati Works members. Given that 18 percent of non-Cincinnati Works members are charged with a felony sometime in the five years after their applications, Cincinnati Works decreases the probability of criminal charges by 50 percent. Moreover, the reduction in crime is driven by those individuals who were not previously felons. Cincinnati Works appears to be more effective at keeping individuals out of the criminal justice system for the first time, compared to reducing the recidivism rate. Finally, I find that the benefit per Cincinnati Works participant is between $551 and $1,789 a year, depending on whether or not the marginal costs of a prison system include employee compensation.


Cigarette Taxes in Ohio

(Forthcoming in Business Case Journal)

Synopsis: This descriptive case examines the economic issues in the 2015 Ohio budget proposal that was presented to the Ohio legislature by Governor Kasich.  In 2015, Ohio’s Governor Kasich proposed a budget that would reduce the state’s income tax for both businesses and individual taxpayers.  To offset this reduction in income tax collections, Governor Kasich proposed broadening and raising other taxes – including cigarette excise taxes by $1 per pack. 


Under the tax cut proposal, Governor Kasich would reduce state tax collections by nearly $5.7 billion.  However, the offsetting tax increases would be projected at $5.2 billion over the FY2016 and FY2017 budget, resulting in a net tax cut of over $500 million.  In addition to political resistance from both Republicans and Democrats, Governor Kasich also faced economic questions.  For example, how realistic was his estimate of state tax collections?  To what extent would consumers alter their purchasing behavior in response to increased taxes?  What would be the long-term health consequences for a reduction in smoking rates? 


This case has been used with introductory economics classes at the undergraduate level, as well as with managerial economics at the graduate level.  The case would also be appropriate for a public finance or health economics class.

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