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Do Financial Incentives Work for Low-Performing Kids? Some Economists Say "Not Really."


While you were watching the NFL playoffs this weekend, economists converged on New Orleans for the American Economic Association's annual meeting - think Mardi Gras, but without the fun.

For the early risers yesterday morning, there was a panel called "Student Incentives in Action: Experimental Evidence from Offering Money for Educational Achievement." Roland Fryer and Ceci Rouse, originally scheduled to present, were no shows, but there were three other papers presented: the first by Case Western's Eric Bettinger called, "Paying to Learn: The Effects of Financial Incentives on Elementary Test Scores" (policy brief available here), a second by Josh Angrist, Daniel Lang, and Philip Oreopoulos, "Lead Them To Water and Pay Them to Drink: An Experiment With Services and Incentives for College Achievement," and a third by Angrist and Victor Lavy called "The Effect of High-Stakes High School Achievement Rewards: Evidence from a Group Randomized Trial" (the latter two are available here).

Bettinger's study was based on a randomized experiment where students were paid for performance on periodic math, reading, writing, social studies, and science tests. These incentives increased test scores only in math, but not in any other subject. And the kids who gained the most from receiving the incentive were those already performing at higher levels, not the lowest performing students. Here's the kicker: The study was multi-year, such that some students were given incentives in one year and not in the next. Advocates of incentives argue that while students will react to the cash at first, when the incentive is taken away, they will learn "for learning's sake." Yet Bettinger found no carry over effects when the incentive was taken away, writing, "This may suggest that the existence of external motivation has a negative effect on the intrinsic desire to learn." What's worse, kids reverted back to their initial achievement level, suggesting that the incentives affected not permanent learning, but short-term effort.

Bettinger also shared two funny stories about how teachers used the cash as motivation: in one case, a teacher had the kids chant "Show me the money!" In another case, a teacher hung a giant $100 bill in her classroom. For writing practice, kids were asked to write about how they would spend their money.

In the other K-12 paper, Angrist and Lavy found that offering financial incentives to pass a high-stakes test in Israel improved outcomes for girls, but not boys. The effects on girls were largely driven by an increase in passing rates among those who had a relatively high chance of passing these exams to begin with.

Taken together, these studies don't bode well for the current drive to improve outcomes for the lowest performing students by paying them.


So Bettinger's research shows a .16 standard deviation increase for math and a .14 standard deviation increase in social studies (not so much in reading, for some reason). Is this so much worse than Krueger's finding from the Tennessee STAR experiment that attending a small class "appears to have raised test scores by about 0.2 standard deviations while students were in small classes in grades K-3"? (Quote from p. 39 of Inequality in America, by James Heckman and Alan Krueger).

Hey Stuart,

You're correct that the one year gains look great, at least in math (I missed this social studies finding - can you post a link if you have one?). But Bettinger reported yesterday that the gains are transitory and disappear when the incentive disappears - while the class size studies show long-term effects from being in smaller classes.

Stuart - Sorry, ignore my request for the link above. I see the graph you're referring to (in the policy brief linked above for others who are interested).

Well, I think Krueger reported that the class size effect remained in subsequent years, but was halved. And the class size experiment lasted for three years, whereas Bettinger is saying what happens after just one year.

But those are quibbles. If giving out modest rewards (surely far cheaper than reducing class size) does improve "effort," even for the short term, why not add it into the mix? No one thing is ever going to solve the achievement gap, so why rule out anything that works even slightly?

Clarification: Bettinger's finding of no lasting effect is about students who got one year of treatment, right?

Hi Stuart, Yep, 1 year. I think your point is that if kids have multiple years of the treatment, there may be a lasting effect, and it's certainly possible. I'm going to ask Bettinger for the paper, so I'll share it with you when I get it.

Comments are now closed for this post.


Recent Comments

  • eduwonkette: Hi Stuart, Yep, 1 year. I think your point is read more
  • Stuart Buck: Clarification: Bettinger's finding of no lasting effect is about students read more
  • Stuart Buck: Well, I think Krueger reported that the class size effect read more
  • eduwonkette: Stuart - Sorry, ignore my request for the link above. read more
  • eduwonkette: Hey Stuart, You're correct that the one year gains look read more




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