A Quantitative Theory of Teacher Quality: Evidence from a Dynamic Structural Model Estimated using an Incentive Pay Experiment

24.02.2025 14:15 – 15:30

INSTITUTE OF ECONOMICS AND ECONOMETRICS SEMINAR

Abstract:

Teacher quality is an important determinant of the distribution of student achievement. Researchers have documented considerable cross-sectional variation in the quality of even novice teachers, but this variation is not well-explained by teachers’ observable characteristics. Although the determinants of teacher quality are not yet well understood, researchers have documented the effects of output-based incentives on teacher quality and substantial growth in teacher quality over teachers’ careers. I combine classic human capital and asymmetric information frameworks to develop an estimable dynamic model of teacher quality. Teacher human capital may be generated by on-the-job investments and/or by learning-by-doing. The model allows for variation in teachers’ initial human capital (hidden types) as well as for teachers to make unobserved effort inputs (hidden actions). I then estimate the model using experimental variation from Muralidharan and Sundararaman (2011), a teacher incentive pay experiment in Andhra Pradesh. Preliminary results indicate that hidden human capital types explain the lion’s share of quality variation, and that on-the-job investments are responsible for the majority of teacher quality growth. Under the incentive scheme in Muralidharan and Sundararaman (2011), the increase in teacher quality that took place during the intervention is attenuated by the reduction in future quality.

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