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.
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.