Incentivising teachers? Evaluating the incentive effect of China's teacher performance-based compensation reform in rural China

In this paper, we evaluate the incentive role of a teacher performance-based compensation reform in rural China. Using the value-added model widely adopted in the education literature, we first estimated the teacher effects on student academic scores with panel data of a large number of students and teachers from rural and urban schools in one county in a south-western province of China. The estimated teachers' value-add was then allowed us to examine the effectiveness of the 2009 teachers' compensation reform. We find that despite the strong intent of the performance-based compensation reform to improve student's academic performance, teachers' compensations are not closely tied to teachers' value-add to student academic achievement. This suggests that the performance-based compensation reform is not able to provide strong incentives for teachers to raise students' test scores and points towards the possible problems with the design and/or implementation of the reform.