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Incentives in education

Both of the previous two research commentaries posted to this site comment on recently published papers analysing the effects of various forms of incentives in education.

As I explain in my commentary on a study of the effect of financial incentives on pupils, the extent to which incentives might improve pupil outcomes is debated. Such incentives include a wide range of policies often associated with market- and accountability-based education, such as the introduction of high-stakes standardised tests, government accountability, teacher-performance pay, and financial rewards for pupils.

The argument in favour of external incentives is partly that they motivate pupils, teachers, and other actors in the education system to focus on improving whatever goals policymakers seek to achieve. This is seen as important as the level of effort among the actors within the education system is not observed by the government, and as the financier it needs to ensure that its money is well-spent.

By linking incentives to actors’ performance, the hope is to ensure that they put in the effort required. Also, incentives are seen as a way of countering pupils’ tendency to discount future rewards in their decision-making about how much effort to put in to their education. By providing external incentives to do well on certain tasks, pupils are given more immediate rewards to their effort and the returns to higher performance are made more salient.

Yet others argue that external incentives may backfire. A common view in the educational community is that such incentives erode internal motivation among actors, a view that can be traced all the way back to Jean-Jacques Rousseau’s Émile. If this is the case, introducing incentives in the education system may very well generate lower performance. Furthermore, by introducing various forms of incentives to maximise effort to reach specific goals, other important, non-incentivised educational outcomes, which cannot necessarily be measured, may be compromised. Incentives may also lead to gaming, manipulation of the incentivised outcomes, or even outright cheating. For example, high-stakes testing could incentivise teachers merely to coach pupils to do well in the tests, rather than to improve their knowledge and understanding of the subject.

So what does the empirical research say? Overall, the findings are decidedly mixed and they appear to depend on what types of incentives are introduced and in what ways. For example, as evidenced by the study commented on by Lee Crawfurd, featured papers in this issue, the effects of standardised testing appear more positive in low-achievement settings than in high-achieving ones. The story is similar when it comes to teacher performance pay: research from low-income countries appears to show quite positive effects, whereas research in developed countries often finds no impact of such systems. Still, it is difficult to discern whether or not these differences are due to design or context. For example, research framing incentives in terms of losing a benefit rather than making a gain, so capitalising on what behaviourists term ‘loss aversion’, sometimes finds positive effects of teacher performance pay also in developed country settings. Some evidence indicates this also applies to pupils. And while some papers find evidence that accountability generates different forms of manipulation, other papers show positive effects from accountability systems on achievement in tests that carry no incentives as well as long-term outcomes, suggesting that all gains cannot merely be accounted for by various form of gaming and manipulation. Ultimately, therefore, there are a lot of questions that remain to be answered about optimal design and delivery of incentives. As we often are forced to conclude: further research and experimentation are necessary.

Gabriel Heller-Sahlgren

Gabriel Heller-Sahlgren is Lead Economist at CfEE and Editor of its Monthly Research Digest. Each month in the Digest, he introduces and briefly overviews an important theme in economic research in the field of education.                                                                                     
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