Incentives Work: Getting Teachers to Go to School

Esther Duflo, Rema Hanna, and Stephen P. Ryan, American Economic Review, Volume 102, Issue 4, June 2012, pp. 1241–78

We use a randomized experiment and a structural model to test whether monitoring and financial incentives can reduce teacher absence and increase learning in India. In treatment schools, teachers’ attendance was monitored daily using cameras, and their salaries were made a nonlinear function of attendance. Teacher absenteeism in the treatment group fell by 21 percentage points relative to the control group, and the children’s test scores increased by 0.17 standard deviations. We estimate a structural dynamic labor supply model and find that teachers respond strongly to financial incentives. Our model is used to compute cost-minimizing compensation policies.