American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
Preferences, Selection, and the Structure of Teacher Pay
American Economic Journal: Applied Economics
(pp. 310–46)
Abstract
I examine teacher preferences using a discrete-choice experiment linked to data on teacher effectiveness. I estimate willingness to pay for a rich set of compensation elements and working conditions. Highly effective teachers usually have the same preferences as their peers, but they have stronger preferences for performance pay. I use the preference estimates to investigate the optimal compensation structure for three key objectives: maximizing teacher utility, maximizing teacher retention, and maximizing student achievement. Under each objective, schools underutilize salary and performance pay while overutilizing retirement benefits. Restructuring compensation can significantly improve both teacher welfare and student achievement.Citation
Johnston, Andrew C. 2025. "Preferences, Selection, and the Structure of Teacher Pay." American Economic Journal: Applied Economics 17 (3): 310–46. DOI: 10.1257/app.20210763Additional Materials
JEL Classification
- H75 State and Local Government: Health; Education; Welfare; Public Pensions
- I21 Analysis of Education
- J31 Wage Level and Structure; Wage Differentials
- J32 Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
- J45 Public Sector Labor Markets
- J81 Labor Standards: Working Conditions