Recruitment, effort, and retention effects of performance contracts for civil servants: Experimental evidence from Rwandan primary schools

TL;DR

This study uses a two-stage experiment in Rwandan primary schools to evaluate how performance-based pay influences teacher recruitment, effort, and student learning outcomes, revealing significant positive effects on effort and learning.

Contribution

It provides novel experimental evidence disentangling recruitment and effort effects of pay-for-performance contracts in a developing country context.

Findings

P4P increased teacher effort by 0.16 SD within a year.

Total effect on pupil learning was 0.20 SD after accounting for selection.

The experiment isolates recruitment and effort effects of P4P.

Abstract

This paper reports on a two-tiered experiment designed to separately identify the selection and effort margins of pay-for-performance (P4P). At the recruitment stage, teacher labor markets were randomly assigned to a 'pay-for-percentile' or fixed-wage contract. Once recruits were placed, an unexpected, incentive-compatible, school-level re-randomization was performed, so that some teachers who applied for a fixed-wage contract ended up being paid by P4P, and vice versa. By the second year of the study, the within-year effort effect of P4P was 0.16 standard deviations of pupil learning, with the total effect rising to 0.20 standard deviations after allowing for selection.