The relative effectiveness and costs of contract and regular teachers in India

While use of contract teachers provides a low-cost way to increase teacher numbers, it raises the quality concern that these less trained teachers may be less effective.  We estimate the causal contract-teacher effect on student achievement using school fixed effects and value-added models of the education production function, using Indian data.  We allow for both homogenous and heterogeneous treatment effects, to highlight the mechanisms through which the contract teacher effect works.  We also present school fixed effects teacher pay equations and predict achievement marks per Rupee spent on regular and contract teachers.  We find that despite being paid just a third of the salary of regular teachers with similar observed characteristics, contract teachers produce higher student learning.