This chapter analyzes the design of incentive schemes in education while reviewing empirical studies that evaluate performance pay programs for educators. Several themes emerge. First, it is difficult to use one assessment system to create both educator performance metrics and measures of...

We analyze an incentive pay scheme for educators that links educator compensation to the ranks of their students within appropriately defined comparison sets, and we show that under certain conditions this scheme induces teachers to allocate socially optimal levels of effort to all students....

Education officials often use one assessment system both to create measures of student achievement and to create performance metrics for educators. However, modern standardized testing systems are not designed to produce performance metrics for teachers or principals. They are designed to...