Teacher Performance Pay in India

Updated: Feb 09, 2018
Evidence Rating:
Near Top Tier


  • Program:

    A low-cost performance pay program for primary school teachers in rural India, which awards them an annual bonus of about $14 for each percentage point gain in their students’ math and language test scores.

  • Evaluation Methods:

    Well-conducted randomized controlled trial (RCT) with a large, representative sample of rural schools in the Indian state of Andhra Pradesh.

  • Key Findings:

    The program produced gains in all four subjects measured (math, language, science, and social studies), increasing the average achievement score by between 6 and 13 percentile points in performance pay schools compared to control schools, over a 2-3 year period.

  • Other:

    A study limitation is that schools in the sample were all located in one Indian state. Thus, replication of these findings in a second trial, in another setting, would be desirable to confirm the initial results and establish that they generalize to other settings where the program might be implemented.

This program, administered by the Azim Premji Foundation (a non-governmental organization), provided teachers in government-run primary schools in rural India (grades 1-5) with financial bonus payments for increasing the math and language achievement of their students. The bonuses were designed to address the inter-related problems of (i) low teacher effort in rural India, such as pervasive absenteeism, and minimal teaching activity even among many of those present [Kremer et. al., 2005]; and (ii) low student achievement as reflected, for example, in the finding from an all-India survey of rural households that approximately half of students enrolled in 5th grade cannot read at a 2nd grade level [Pratham 2014].

The bonus payments to teachers were worth approximately $14 for each percentage point gain in their students’ average math and language test scores, compared to the students’ test scores at the end of the previous year. The bonuses were awarded annually, over the five years of the project. A typical teacher in the study earned a base salary plus benefits of about $3,200 per year, and the average annual bonus was calibrated to be about 3% of this amount (roughly $97). [1]

The cost of the program, including both the bonuses and the administration of the tests used to calculate the bonuses, was approximately $400 per school per year. This equates to a per-student cost of about $3 per year, making it a very low-cost program. A more detailed description of the program can be found on pages 50-52 of Muralidharan and Sundararaman, 2011.

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[1] Monetary amounts reported in this summary are 2017 dollars, obtained by converting rupees to dollars, and adjusting for inflation.

Main Study:

Muralidharan, Karthik. “Long-Term Effects of Teacher Performance Pay: Experimental Evidence from India.” April 2012 (link).

Muralidharan, Karthik and Venkatesh Sundararaman. “Teacher Performance Pay: Experimental Evidence from India.” Journal of Political Economy, February 2011, vol. 119, no. 1, pp. 39-77.

Muralidharan, Karthik and Venkatesh Sundararaman. “Teacher Performance Pay: Experimental Evidence from India.” NBER Working Paper No. 15323, September 2009.

Other References:

Pratham, ASER Centre. Annual Status of Education Report (Rural) 2013, Provisional. January 15, 2014 (link).

Kremer, Michael, Karthik Muralidharan, Nazmul Chaudhury, F. Halsey Rogers, and Jeffrey Hammer. “Teacher Absence in India: A Snapshot.” Journal of the European Economic Association, April-May 2005, vol. 3, no. 2-3, pp. 658-667.