"The Role of Production Uncertainty in Teacher Performance Pay: Theory and Experimental Evidence", presented at the International Conference of the Association for Public Policy Analysis and Management (APPAM) on July 13
Teacher performance incentives have not had consistently positive effects in the U.S. A necessary theoretical and empirical problem is how to design an incentive to induce the optimal allocation of effort among multiple tasks, which is usually modeled by assuming agents know the production function. Unlike some production processes in which output relies solely on worker skill and effort, teaching is distinguished by its complexity and its dependence on the reciprocal effort of students. The result is a context in which individual teachers are uncertain about the net marginal productivity of inputs. The innovation of this paper is to develop a model in which uncertainty about the production process in student learning (“production uncertainty”) is incorporated explicitly in the model of behavior and to assess agent responses to different incentive schemes in a laboratory experiment.