Double for nothing? Experimental evidence on an unconditional teacher salary increase in Indonesia

Joppe De Ree, Karthik Muralidharan, Menno Pradhan, Halsey Rogers

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

How does a large unconditional increase in salary affect the performance of incumbent employees in the public sector?We present experimental evidence on this question in the context of a policy change in Indonesia that led to a permanent doubling of teacher base salaries. Using a large-scale randomized experiment across a representative sample of Indonesian schools that accelerated this pay increase for teachers in treated schools, we find that the large pay increase significantly improved teachers' satisfaction with their income, reduced the incidence of teachers holding outside jobs, and reduced self-reported financial stress. Nevertheless, after two and three years, the increase in pay led to no improvement in student learning outcomes. The effects are precisely estimated, and we can rule out even modest positive impacts on test scores. Our results suggest that unconditional pay increases are unlikely to be an effective policy option for improving the effort and productivity of incumbent employees in public-sector settings.

Original languageEnglish
Pages (from-to)993-1039
Number of pages47
JournalQuarterly Journal of Economics
Volume133
Issue number2
DOIs
Publication statusPublished - 1 May 2018

Fingerprint

Teacher salaries
Indonesia
Incumbents
Public sector
Salary
Employees
Learning outcomes
Income
Policy change
Productivity
Student learning
Test scores
Randomized experiments
Policy options

Cite this

De Ree, Joppe ; Muralidharan, Karthik ; Pradhan, Menno ; Rogers, Halsey. / Double for nothing? Experimental evidence on an unconditional teacher salary increase in Indonesia. In: Quarterly Journal of Economics. 2018 ; Vol. 133, No. 2. pp. 993-1039.
@article{1a1a0d997c864f39bc701f8fd913560d,
title = "Double for nothing? Experimental evidence on an unconditional teacher salary increase in Indonesia",
abstract = "How does a large unconditional increase in salary affect the performance of incumbent employees in the public sector?We present experimental evidence on this question in the context of a policy change in Indonesia that led to a permanent doubling of teacher base salaries. Using a large-scale randomized experiment across a representative sample of Indonesian schools that accelerated this pay increase for teachers in treated schools, we find that the large pay increase significantly improved teachers' satisfaction with their income, reduced the incidence of teachers holding outside jobs, and reduced self-reported financial stress. Nevertheless, after two and three years, the increase in pay led to no improvement in student learning outcomes. The effects are precisely estimated, and we can rule out even modest positive impacts on test scores. Our results suggest that unconditional pay increases are unlikely to be an effective policy option for improving the effort and productivity of incumbent employees in public-sector settings.",
author = "{De Ree}, Joppe and Karthik Muralidharan and Menno Pradhan and Halsey Rogers",
year = "2018",
month = "5",
day = "1",
doi = "10.1093/qje/qjx040",
language = "English",
volume = "133",
pages = "993--1039",
journal = "Quarterly Journal of Economics",
issn = "0033-5533",
publisher = "Oxford University press",
number = "2",

}

Double for nothing? Experimental evidence on an unconditional teacher salary increase in Indonesia. / De Ree, Joppe; Muralidharan, Karthik; Pradhan, Menno; Rogers, Halsey.

In: Quarterly Journal of Economics, Vol. 133, No. 2, 01.05.2018, p. 993-1039.

Research output: Contribution to JournalArticleAcademicpeer-review

TY - JOUR

T1 - Double for nothing? Experimental evidence on an unconditional teacher salary increase in Indonesia

AU - De Ree, Joppe

AU - Muralidharan, Karthik

AU - Pradhan, Menno

AU - Rogers, Halsey

PY - 2018/5/1

Y1 - 2018/5/1

N2 - How does a large unconditional increase in salary affect the performance of incumbent employees in the public sector?We present experimental evidence on this question in the context of a policy change in Indonesia that led to a permanent doubling of teacher base salaries. Using a large-scale randomized experiment across a representative sample of Indonesian schools that accelerated this pay increase for teachers in treated schools, we find that the large pay increase significantly improved teachers' satisfaction with their income, reduced the incidence of teachers holding outside jobs, and reduced self-reported financial stress. Nevertheless, after two and three years, the increase in pay led to no improvement in student learning outcomes. The effects are precisely estimated, and we can rule out even modest positive impacts on test scores. Our results suggest that unconditional pay increases are unlikely to be an effective policy option for improving the effort and productivity of incumbent employees in public-sector settings.

AB - How does a large unconditional increase in salary affect the performance of incumbent employees in the public sector?We present experimental evidence on this question in the context of a policy change in Indonesia that led to a permanent doubling of teacher base salaries. Using a large-scale randomized experiment across a representative sample of Indonesian schools that accelerated this pay increase for teachers in treated schools, we find that the large pay increase significantly improved teachers' satisfaction with their income, reduced the incidence of teachers holding outside jobs, and reduced self-reported financial stress. Nevertheless, after two and three years, the increase in pay led to no improvement in student learning outcomes. The effects are precisely estimated, and we can rule out even modest positive impacts on test scores. Our results suggest that unconditional pay increases are unlikely to be an effective policy option for improving the effort and productivity of incumbent employees in public-sector settings.

UR - http://www.scopus.com/inward/record.url?scp=85045776663&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85045776663&partnerID=8YFLogxK

U2 - 10.1093/qje/qjx040

DO - 10.1093/qje/qjx040

M3 - Article

VL - 133

SP - 993

EP - 1039

JO - Quarterly Journal of Economics

JF - Quarterly Journal of Economics

SN - 0033-5533

IS - 2

ER -