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Deregulating Teacher Labor Markets

Author

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  • Burgess, Simon

    (University of Bristol)

  • Greaves, Ellen

    (University of Exeter)

  • Murphy, Richard J.

    (University of Texas at Austin)

Abstract

A common feature of public sector labor markets is the use of pay scales. This paper examines how the removal of pay scales impacts productivity, by exploiting a reform that compelled all schools in England to replace pay scales with school-designed performance related pay schemes. We find that schools in labor markets with better outside options for teachers saw relatively higher increases in teacher pay. Schools in these areas relatively increase their spending on teachers, have higher teacher retention and larger improvements in student tests scores. These effects are largest in schools with the high proportions of disadvantaged students. We conclude that the pay rigidities in the form of centralized pay schedules result in a misallocation of resources, by preventing such schools from retaining their teachers.

Suggested Citation

  • Burgess, Simon & Greaves, Ellen & Murphy, Richard J., 2019. "Deregulating Teacher Labor Markets," IZA Discussion Papers 12592, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp12592
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    References listed on IDEAS

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    1. Barbara Biasi & Heather Sarsons, 2020. "Flexible Wages, Bargaining, and the Gender Gap," NBER Working Papers 27894, National Bureau of Economic Research, Inc.
    2. Greaves, Ellen & Sibieta, Luke, 2019. "Constrained optimisation? Teacher salaries, school resources and student achievement," Economics of Education Review, Elsevier, vol. 73(C).
    3. Victor Lavy, 2009. "Performance Pay and Teachers' Effort, Productivity, and Grading Ethics," American Economic Review, American Economic Association, vol. 99(5), pages 1979-2011, December.
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    6. Thomas S. Dee & Benjamin J. Keys, 2004. "Does merit pay reward good teachers? Evidence from a randomized experiment," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 23(3), pages 471-488.
    7. Donald Boyd & Hamilton Lankford & Susanna Loeb & James Wyckoff, 2005. "Explaining the Short Careers of High-Achieving Teachers in Schools with Low-Performing Students," American Economic Review, American Economic Association, vol. 95(2), pages 166-171, May.
    8. Brian A. Jacob & Lars Lefgren, 2005. "Principals as Agents: Subjective Performance Measurement in Education," NBER Working Papers 11463, National Bureau of Economic Research, Inc.
    9. Barbieri, Gianna & Rossetti, Claudio & Sestito, Paolo, 2011. "The determinants of teacher mobility: Evidence using Italian teachers’ transfer applications," Economics of Education Review, Elsevier, vol. 30(6), pages 1430-1444.
    10. Roland G. Fryer, 2013. "Teacher Incentives and Student Achievement: Evidence from New York City Public Schools," Journal of Labor Economics, University of Chicago Press, vol. 31(2), pages 373-407.
    11. James Buchan & Steven Black, 2011. "The Impact of Pay Increases on Nurses' Labour Market: A Review of Evidence from Four OECD Countries," OECD Health Working Papers 57, OECD Publishing.
    12. Simon Burgess & Marisa Ratto, 2003. "The Role of Incentives in the Public Sector: Issues and Evidence," The Centre for Market and Public Organisation 03/071, The Centre for Market and Public Organisation, University of Bristol, UK.
    13. Esther Duflo & Rema Hanna & Stephen P. Ryan, 2012. "Incentives Work: Getting Teachers to Come to School," American Economic Review, American Economic Association, vol. 102(4), pages 1241-1278, June.
    14. Atkinson, Adele & Burgess, Simon & Croxson, Bronwyn & Gregg, Paul & Propper, Carol & Slater, Helen & Wilson, Deborah, 2009. "Evaluating the impact of performance-related pay for teachers in England," Labour Economics, Elsevier, vol. 16(3), pages 251-261, June.
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    17. Berlinski, Samuel & Ramos, Alejandra, 2020. "Teacher mobility and merit pay: Evidence from a voluntary public award program," Journal of Public Economics, Elsevier, vol. 186(C).
    18. Donald Boyd & Hamilton Lankford & Susanna Loeb & James Wyckoff, 2005. "The draw of home: How teachers' preferences for proximity disadvantage urban schools," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 24(1), pages 113-132.
    19. Simon Burgess & Marisa Ratto, 2003. "The Role of Incentives in the Public Sector: Issues and Evidence," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(2), pages 285-300, Summer.
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    Cited by:

    1. Torberg Falch & Bjarne Strøm, 2024. "Teacher demand, teacher education, and teacher shortages. A new data set 1861-2024 for Norway," Working Paper Series 19924, Department of Economics, Norwegian University of Science and Technology.
    2. Willén, Alexander, 2021. "Decentralization of wage determination: Evidence from a national teacher reform," Journal of Public Economics, Elsevier, vol. 198(C).

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    More about this item

    Keywords

    performance related pay; teachers; pay scales; productivity;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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