ENG[5] CP 151 - alexandre lima waltenberg_CB.indd

24 Pages·2014·0.59 MB·English

OTHER ISSUES M
http://dx.doi.org/10.1590/198053142853 araysa Rib
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lexan
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ECONOMIC THEORY equ
eira P
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AND DIFFICULTIES d
e Lim
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WITH TEACHERS’ PAY- io
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FOR-PERFORMANCE es W
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SCHEMES
MARAYSA RIBEIRO ALEXANDRE
RICARDO SEQUEIRA PEDROSO DE LIMA
FÁBIO DOMINGUES WALTENBERG
TRANSLATED BY Marina Waltenberg Mauritz
ABSTRACT For their generous
comments, critiques and
Relating teacher payment to pupils’ standardized test scores is spreading in Brazil. suggestions, the authors
are grateful and exempt
Such policies do not find their theoretical roots in the field of education science, but from any responsibility for
mistakes and omissions in
rather in the economic-management literature, especially in the so-called “principal- this text: Ariana Martins de
C
Britto, Érica Pereira Carneiro, a
agent model”. While they are regarded by some as a cornerstone for improving Aloysio de Carvalho, Marco der
education quality, they are rejected by non-economists. The empirical evidence Tulio França, Danielle no
Carusi Machado, Jesus s d
is ambiguous: both positive and non-positive effects have been documented. The Alexei Obregón and the e P
participants of seminars es
contribution of this paper is to revisit the theoretical framework on which pay-for- in Centro de Estudos qu
sobre Desigualdade e isa
performance schemes lay, aiming at testing the hypothesis that inconclusive effects Dfoers Setnuvdoilevsim oenn Itnoe q[Cueanlittye r v.44
cinovueldst ihgaavtee bweheent hperre dtihcet etdh eboyr yth seh eecdosn loimghitc lointe rtahteu rreea istosenlsf . wChoym psulecmh epnotlaicriielys , awree aUnndiv Deresvidealodpem Feendte],r aalt n.151 p
strongly rejected in certain circles. We provide positive answers to both questions. FFalolournm tghin e1e2 fn imnseao,n nNctihiatsel ,r sRóuiip,c Bparordarzot i l). .37-61 jan
Lima thanks the Pibic/ ./m
TEACHER ACCOUNTABILITY PROGRAM • TEACHER PAY • CMNarPaqy/sUa FAFle Pxraongdrraem th. anks ar. 20
PRINCIPAL-AGENT MODEL • ECONOMICS OF EDUCATION Cofa mpeass tfeorrs t’ hsec h2o4l amrsohnipth.s 14 37
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n The 1990S, standardized learning assessment tests were created and
spread throughout Brazil. Over the following decade, this process
intensifies, gains popularity and leads to a virtually inevitable corollary:
the introduction of policies linking teacher payment to pupil’s
performance in standardized tests. As reported in Andrade (2008),
Ferraz (2009) and Bruns et al. (2011), following an international trend,
a number of such policies are being implemented in many states and
municipalities.
Such policies, here referred to as “accountability” or “incentive”
policies, do not find theoretical root in the field of educational science.
They are usually suggested by economists, administrators, academics
014 or managers in departments of education, deliberately or inadvertently
2
mar. inspired by an economic-management literature called “information
n./
61 ja economics”, or “economics of contracts”, developed over the last 50 years.
p.37- More specifically, these policies are inspired by the “principal-agent
51
n.1 model”, which studies situations in which an “agent” (e.g., a teacher)
4
4
a v. is hired by a “principal” (e.g., a commissioner of education) to perform
s
ui a set of tasks (e.g., prepare for classes, motivate pupils, organize
q
s
e
e P classroom time, etc.), aiming at producing a good or service of interest
d
os to the principal (e.g., that pupils learn). In general, the agent’s effort
n
r
de in performing the set of tasks assigned to him cannot be perfectly
a
C
8 observed by the principal, but some result of the process can (e.g.,
3
pupils’ grades). Under these circumstances, it is suggested that teachers M
are paid according to such outcomes, assuming this would motivate araysa R
ib
them to act as desired by the principal (e.g., by increasing efforts). It is eiro
A
believed that, even if the principal does not know exactly how the agent lexan
should act in order to achieve the aspired results, under an incentives dre, R
regime, the agent himself would search and find solutions to problems icard
o
– whether pedagogical, disciplinary, administrative or of other nature – Seq
u
faced daily, leading pupils to learning more (TRANNOY, 1999). eira P
On the one hand, these policies are usually not well received edro
so
by education professionals, especially by teacher unions, as recently de Lim
regarded in the teachers’ strikes in Rio de Janeiro. By expressing their a e F
loathing of “meritocracy”, they were truly stating their disavowal of áb
io
D
accountability policies. Resistance to this practice can also be seen in om
in
g
other countries, as reported, for instance, by Diane Ravitch (2010), ues W
researcher converted to criticizing and denouncing such policies in the alten
USA, after years endorsing them. berg
On the other hand, such policies continue to spread in Brazil,
under the administration of varied parties,1 supported by prestigious
economists, managers or other members of the national intelligentsia.2
The same applies to other countries. In the United States of America, for
instance, the Obama administration has sustained teacher accountability
programs inherited from the Bush administration as key pieces of its
1
education policy – and for doing so, received endorsement in editorials Maybe Brazilian governing
authorities only indulge their
of important newspapers, even some with non-conservative bias, such voters’ will. A recent survey
suggests that the majority
as The New York Times.3 of Brazilians look favorably
upon teachers’ pay schemes
Ideally it would be possible to diminish the conflict between
based on pupils’ outcomes
(DOLTON; MARCENARO-
opinions a priori in favor or against accountability policies by means
GUTIERREZ, 2013).
of the analysis of concrete assessments of results. For example, should
2
an important part of empirical studies conclude that these policies As illustrated by the letter
of endorsement to the
are ineffective in improving pupils’ learning, even their most ardent Municipal Department
of Education of Rio de
proponent could surrender to the evidence – and vice versa, in the Janeiro, signed by various
leaderships in the academic
opposite situation. However, results have been inconclusive, adding
circle and the civil society
in response to inter alia
fuel to the fire: positive effects have been recorded (e.g., LAVY, 2002),
critics to the merit-based
C
as well as null or even surprisingly negative ones (e.g., FRYER, 2013). At pay scheme introduced in ad
the municipality. The motion, er
times, even one single program presents positive results for one grade entitled “Claudia Costin and no
the education in the city of s d
and null or negative results for another (e.g., OSHIRO; SCORZAFAVE, Rio de Janeiro” (“Claudia e P
Costin e a educação na es
2011; ALEXANDRE, 2013). In this context, both supporters and cidade do Rio de Janeiro”) qu
oopppinoinoenGns,ti vsr eetnespn tedhc ittsoi v bpearlcyikz.eg raonudn edm, tphhea msizaein r ecsounlttrsi baluitginoend o wf itthhi st haertiric olew ins cSo<sihatcnetnh stNp wimb:o/a/eovwr nertw/ezm?amwpbd.=sae c4inrnh3 ’ws 28S 65abirm&tltholzao,mgn n2,ga 0 p=n1po.o3tsr:-gt b e.brd>r/. isa v.44 n.151 p
to revisit the theoretical framework on which accountability policies 3For example, the editorials .37-61 jan
lay, aiming at testing the hypothesis that inconclusive effects could from February 4th, 2009, “A ./m
have been predicted by the economic literature itself. In other words, that vanitdal fbroomos Mt faorrc hE d18utch,a tion”, ar. 20
a careful analysis of the theoretical fundamentals of the principal-agent 2N0o1 0C,h “iMldr .L Oefbta Bmeah ianndd”. 14 39
OS model, with all specificities of its application to the education field
D
A
ULT regarded, would make it possible – or rather would have made it possible
ES
R R – to foresee difficulties in the implementation of such programs. This
O
P
ES analysis of the theoretical framework also has a complementary
R
O
ESS purpose: understanding whether the theory sheds light on the reasons
OF
PR behind many teachers’, unions’ and intellectuals’ strong repulse of
E
D
O accountability programs. The hypothesis presented here is that this
Ã
Ç
A
R rejection is not owed to a merely dogmatic or ideological opposition
E
N
U
EM (though these ingredients may be present), but also to reasons that
R
M
O reverberate economic principles and findings, even with the debate in
C
AS
M the aforementioned circles clearly not being carried out and expressed
E
BL
RO in the economic jargon.
P
E
CA In order to illustrate the imbroglio in the evidence, it seems
MI
Ô
N unnecessary to present a long survey of the literature. Instead, the
O
C
E
A next section brings a short synthesis of emblematic case studies of
RI
O
TE accountability programs that succeeded, failed or presented ambivalent
results. It is followed by the truly theoretical investigation, reviewing
assumptions and results of the basic principal-agent model, as well as
implications to the analysis of teachers’ pay systems. After that, some
specificities of the application of the general model to the education
scenario are focused. The last part is devoted to this article’s conclusions,
the main of which is the impossibility to refute either of the hypotheses
presented.
DESIGN AND RESULTS OF EMBLEMATIC
aCCounTaBiLiTY ProGraMs
There are so many teacher accountability programs, either in progress
or discontinued, in Brazil and abroad, that thoroughly summarizing
them would be a difficult task.4 Furthermore, such task would also be
4 untimely, since this is not the goal of the present article, devoted to
Detailed descriptions of
a mainly theoretical analysis. Therefore, the choice was to present in
designs and main results
of these programs can
this section only four emblematic case studies of teacher accountability
4 be found in Alexandre
201 (2013) and Lima (2012). programs, both “successful” and “failed” ones, in order to establish the
61 jan./mar. Inp roorgdrearm t,o a b sec hreofoelr rheadd t too t bh5ee foundatOionne foofr tthhee smecotsito npsr othmaitn feonllto awn.d one of the first programs for
37- the only one of its type in
51 p. the region and go from 7th which data was recorded was the successful accountability program
44 n.1 stcoh o12otlhs g arta dthee. Ftirmome, 1t7h0e m32e0t carried out in Israel in the 1990s, reported in Lavy (2002). Out of a group
sa v. tthhee rseeq, 6ui2r ewmeeren tcsh. oAsmeno ntgo of 62 schools non-randomly selected,5 it was decided that those schools
qui the program (37 mixed with pupils among the top third performers in a multidimensional
es Hebrew schools, 18 Hebrew
e P schools and 7 Arab schools). ranking6 would receive a bonus. The socio-economic background of
d
s
no 6 the student body was controlled. The goal was to improve learning
er Average of credits per
ad pupil, proportion of pupils achievement and reduce dropout rate. Out of the total bonus, three
40 C certiftioc aretec eainvde mdraotpriocuutla rtaioten. fourths were destined to teachers’ pay (collective incentive) and the rest
should be used to improve faculty facilities. The bonuses per teacher M
ranged from 1 to 3 percent of the average teacher annual salary. araysa R
ib
Making use of conventional econometric tools for the program eiro
A
evaluation, Lavy (2002) identifies positive and statistically significant lexan
effects for both assessed years in religious schools and only for the second dre, R
year in other schools, except for the proportion of pupils to receive a icard
o
matriculation certificate. Effects were more pronounced among lower Seq
u
performers. Such auspicious results would motivate a number of new eira P
experiments and assessments. edro
so
A recent successful example is found in a context very different de Lim
from the one in Israel: it took place in the Indian state of Andhra Pradesh a e F
in the 2000s and was reported by Muralidharan and Sundararaman áb
io
D
(2011). One of the reasons for the great appreciation for this article om
in
g
is the high scrutiny applied in each step during the implementation ues W
of the program, aiming at producing a perfect assessment from an alten
econometric point of view. A sample of 500 schools was randomly berg
selected. Bonus was to be linearly related to improvement on pupils’
scores in multiple learning assessment tests administered on different
dates (to minimize measurement errors) and under a sophisticated anti-
fraud system. In order for a school to be granted the bonus, pupils’ test
scores should present a minimum improvement of 5%. The mean bonus
was of approximately 3% of the average annual salary.
In both first and second years of the test relevant improvement
has been recorded in the basic subjects (relevant to the bonus), as well as
in other subjects. It was observed that teachers in the awarded schools
started conducting extra classes, giving extra tests and assigning more
homework. According to the authors, the possibility of pupils being
taught to the tests has been verified and rejected.
Another renowned program was introduced in New York public
schools in 2007 and 2008 and reported by Fryer (2013). Unlike the
former two, this program has not presented successful results, despite
its very careful implementation, as in the India case study. Following
specific requirements for participation,7 198 schools were selected for
C
the program, which was carried out by the teachers’ union and the ad
e
r
New York City Department of Education – DOE. Each school had its no
s
d
own performance target, established by a formula that related, with e
P
e
s
different weights, criteria, such as: grades, grade variation (“added q
u
is
knowledge”), elementary graduation rates, attendance, among others. a v.4
Should the target be fully achieved, the school would be entitled to 4 n
.15
a bonus (of up to 4% of the annual teacher’s salary), which could be 1 p
internally distributed at the school’s own discretion, following certain 7 .37-6
In terms of average grades, 1 jan
rules, such as not to distribute rewards unevenly based on seniority. percentage of foreign and ./m
The program received around $75 million and rewarded approximately srapteec, ibael spiudpeisls a agnrede pmoevnetr toyf ar. 20
the majority of teachers to 14
20,000 teachers. take part in the program. 4
1
OS Fryer (2013) found no evidence that teacher incentives would
D
A
ULT have improved pupils’ achievements – on the contrary, he came across
ES
R R negative results, one of which statistically significant – nor substantially
O
P
ES affected pupils’ or teachers’ behavior. Disconcerted, he enumerates
R
O
ESS reasons that could account for such unexpected results, such as: not
OF
PR large enough incentives; complexity of the incentive formula; teachers’
E
D
ÃO lack of knowledge of how to improve pupil performance; incentives
Ç
A
ER unevenly granted based on seniority, despite previous agreement and
N
U
M
E concealed behind different job titles; lack of effectiveness of group-
R
M
O
C based incentives.
AS
M
E Lastly, it is worth mentioning a national example of accountability
BL
O
PR program, carried out in the state of São Paulo, that has already
E
A
MIC undergone at least two assessments (OSHIRO; SCORZAFAVE, 2011;
Ô
N
O ALEXANDRE, 2013), having presented similar results: positive effects
C
E
A
RI for the 5th grade and either null or negative effects for the 9th grade.
O
E
T
The variable compensation system developed in São Paulo was linked
to a school-specific target based on pupils’ grades in Portuguese and
Mathematics and the school’s average pass rates.8 Granted annually, the
bonus is proportional to the percentage of the target accomplished and
may be as high as 20% of the annual salary. In 2009 total bonuses added
up to R$ 650 million (around US$175 millon), granted to approximately
210,000 employees of the educational system of the state of São Paulo.
Even though the index takes into account only Mathematics and
Portuguese, teachers of all subjects, as well as school principals and
other employees are entitled to the bonus. There are restrictions to the
payment of bonuses to teachers who are often absent.
Oshiro and Scorzafave (2011) compare the progress in pupils’
grades in schools run by the state of São Paulo (affected by the program)
and in other schools, that were not affected by it (São Paulo municipal
schools, schools ran by other Brazilian states, etc.), always pairing up
schools with similar characteristics. They come to the conclusion that the
program has had positive (significant) impact over 5th graders’ proficiency
4
01 in both subjects, but negative impact (sometimes statistically significant)
2
mar. for 9th graders. In order to investigate whether these results were due to
n./
61 ja 8 a too short period of time between the beginning of the program and
n.151 p.37- TransSlwiastteoerrme’s ca No dolleet ecA:t veTaedls itath çsrãcooou rgdehes tahs eo basjescets,s macehnite,v iAnlge,x ahnodwree v(e2r0, 1s3im) rileapre aretesdu lttsh: eP oasnitailvyes ise,f fteacktsin fgo r2 0th11e
4 Rendimento Escolar de
4
a v. SEãvoa Pluaautlion g[S Aycstaedmem foicr 5th grade, negative ones for the 9th grade (all of them significant).
s
qui Performance in the State Based on the analysis of these paradigmatic case studies, one
s of São Paulo] – Saresp –,
e
e P which, together with pass may come to the conclusion that, as announced in the introduction,
s d rates, composes the Índice
o de Desenvolvimento da evidence on the effectiveness of accountability programs is still far from
n
r Educação de São Paulo
e
ad [Index of Educational being conclusive and more studies are required. Lastly, it is worth to
42 C Deveolfo Spãmoe Pnat uolfo t]h –e I dSetastpe. emphasize that nothing is known about the actual long term motivation
of teachers or about the long term learning levels of pupils, since all M
available assessments are restricted to the short term. araysa R
ib
eiro
A
reVisiTinG THe BasiC PrinCiPaL-aGenT ModeL lexand
re, R
The principal-agent model is used to analyze conditions for the icard
o
establishment and maintenance of contracts between economic agents S
eq
u
in a situation of asymmetric information. The principal depends on tasks eira P
to be performed by an agent, who disposes of information on her own edro
so
behavior, type or environment, which are not available to the principal d
nor to a third party (e.g., the courts). The first versions of the model e Lima e F
were developed to describe labor relations in the private sector and áb
io
D
between a single agent and a single principal. Variations were later o
m
in
proposed, for instance, adapting the model to the public sector, to the gu
es W
peculiarities of the education sphere, to situations involving multiple alten
agents or principals, among many others. berg
The most acclaimed microeconomic theory handbook (MAS-COLELL;
WHINSTON; GREEN, 1995) was used as source for the analysis of the
basic model. However, the mathematical language, profusely used
in the section devoted to the formal model in the aforementioned
handbook (section 14.B), has been here relegated to footnotes, followed
by explanations. Along the presentation of the basic model in this
section of this article, emphasis is given to aspects relevant to better
outlining and understanding labor relations in the education sphere.
For our purposes, a commissioner of education may be taken
as “principal” and a “teacher” as agent. The principal’s challenge is to
design a monetary compensation system that motivates the agent to
behave accordingly (e.g., by preparing for classes, motivating pupils,
organizing classroom time, etc.), so as to achieve the goals longed by the
principal (e.g., that pupils learn). This result, longed by the principal and
expressed by , should be noticeable to both, as well as to third parties.
On the other hand, the agent’s actions, expressed by e, are known by the
π
agent but, according to the full version of the model, cannot be observed
C
a
by others at a low cost. In fact, it is impossible for a commissioner of d
e
r
n
education to thoroughly monitor the work of each teacher under his o
s
d
administration, making this model at first sight appropriate to describe e P
e
s
labor relations in the education branch. q
u
is
The letter e was chosen to denote actions performed by the agent a v.4
as an analogy to the idea of effort. Even though such literal association 4 n
.15
between e and effort was not necessary, nor was it necessary to limit e 1 p
to a one-dimensional metric, it is a fact that these two simplifications .37-61 jan
are often made, to some extent to bypass mathematical difficulties in ./m
the resolution of the model. The imposition of such simplifications ar. 20
14
may also be due to the nature of the labor relations that originate the 4
3
OS theory – such as landlord-tenant, owner-manager, employer-employee
D
A
ULT and alike –, with the principal literally worried about the agent’s level
ES
R R of dedication in performing his tasks, which does not lose on realism
O
P
ES by being translated in a one-dimensional scale (e.g., number of worked
R
O
ESS hours adjusted by the intensity devoted to each hour). As shown ahead,
OF 9
PR This aspect of the problem the reduction of a teacher’s work to a one-dimensional effort metric
DE can be formally expressed
ÃO by: , may not be reasonable, but let’s overlook this for the moment.
Ç
A or, in equivalent manner, by
ER Fπ(e|a) ≤F π(e|b), π∀ ∈π [π, ―] The result, , is presumably correlated to the actions of the
N
MU , where and
RE rep∫πr e fse π(nte| ath)e > c ∫uπ m fu π(lae|tibv)e, agent, , according to a probability distribution function, . It is
OM π∀d is∈trπ [ibπu, ―ti]on funcFtio(⋅n) and π
AS C f(⋅t)he probability distribution worth eemphasizing the importance of this assumption, whf icπ(he |m)ay be
M function, respectively, and
E expressed as follows: it is assumed that pupils’ performance is affected
E PROBL oauntdcaπon md r etehspe’ rd ehissiegtnrhitbe stuhtt eiloi mlno.iw tTseh πosi ―stf by actions taken by the teacher, but not in a deterministic manner, but rather
A
MIC footnote, as well as the ones in a probabilistic one. It is also assumed that a higher level of effort – say, –
Ô that follow are based on
N
O the presentation form of results, on average, in higher levels of learning achievement, whereas a
A EC the principal-agent model, ea
RI including its notation, as lower level of effort – say, – leads, on average, to lower performance
O
E adopted by Mas-Colell,
T
Whinston and Green (1995). levels by pupils. Therefore, it is assumed that, for a higher level of
eb
10 dedication, a higher result is expected.9
Mas-Colell, Whinston and
Performing all the required tasks to ensure higher levels of
Green (1995) assign the
agent a simple Bernoulli
pupils’ learning achievement is very laborious to the teacher. Therefore,
utility function:
and ,, wwiuhthew( ree, i) =, devoting higher levels of effort is considered costlier to the agent than
resvpw(ec)t i−vge le(yi r)epresenvt w(the) devoting lower levels of effort. The potential conflict of interest between
utility of theg we(ia)ge ain =da tb,h e
disutility of the effort , with the two characters of the model is noticeable, once the principal is
the following charwacteristics:
e . likely to desire high levels of effort by the agent (in order for pupils
v’ w( ) > 0v; ’’ w( ) ≤ 0g; e(a) >g e(b1)1 to get good grades) paying as little as possible (to minimize costs),
In the general model, the
relevant outcome for the whereas the agent would prefer to make little effort, but receive a good
principal is profit, expressed
monetarily. In the case of compensation. Non-economists may find these behavioral assumptions
education, the relevant
strange or inappropriate, but, right or wrong, the fact is that they are
outcome is not monetary
– it is pupils’ test scores.
at the core of conventional economic models. The following section
Nothing would prevent
the assumption that the discusses to what extent they may or may not be adequate, in view of
principal is risk neutral
regarding grades (not the singularities of the labor relations in the educational field.
expressed monetarily),
but not regarding profit The agent is also presumably “risk averse” – in economics,
(expressed monetarily).
The hypothesis that the this means, among other things, that the uncertain and unpredicted
4 principal be neutral to the
01 risk of test scores’ oscillation fluctuation of a specific monetary gain, such as a monthly salary, causes
2
61 jan./mar. thewm pogarurinanldydc eimspsoa auwlk,r eeic.er ese.s e i ofno ntsfh eeue , tayiifml iwtsyoue nctrgohe dbiesccaoumsef otrhti st ois tnhoits iitns dfoivciudsu, atlh.1e0 pInri nocridpearl itso a ssismumpleifdy toth bee arnisakl ynseisu tarnald,
n.151 p.37- hreiosrkn “ euw tooilfui ttlydh peb ocero tmfmoinplioiom”n,i ezwnehtdso bsoyef ic.oem. hpee ins snaotito nne tgoa tbivee elya ranffeedc t(eodr, biyn utnhcee srittauinattiyo nco antc ehrannidn,g otshcei lfliantiaonnc iianl
4 means of diversification.
4
sa v. bSeh roeualdso tnhaisb lseit, ui.aet. isohno nuoldt pupils’ grades).11
qui the principal’s well-being The principal should ensure a minimum level of expected
es strongly depend on pupils’
e P scores in standardized satisfaction to the agent in order to keep the labor contract reasonable
s d tests, then the hypothesis
o of him being risk neutral for him, who would not be willing, for instance, to work for a too low a
n
er would be implausible,
ad making the mathematics salary. Therefore, the principal’s challenge is to establish a compensation
44 C of the mmoodreel ccoomnspidliecraatbedly. formula that helps maximize what is in his best interest (pupils’ grades)
and remains attractive to the agent – in economic jargon, a formula that M
considers the “participation constraints”.12 araysa R
ib
eiro
RESULTS wITH OBSERvABLE EFFORT A
Momentarily leaving aside the difficulty to observe effort, lexand
the problem of optimization under restrictions described above re, Ricard
could be solved, in order to achieve the ideal formula for the agent’s o S
eq
compensation.13 The result shows that the principal should offer the ueira P
agent a fixed compensation. As usual in the hypothetico-deductive ed
ro
models applied in economic theory, the result logically follows from the so d
set of assumptions chosen: assuming that the principal is risk neutral, he e Lim
will provide the agent – risk averse – with full insurance, by not linking a e Fáb
io
his compensation to the observed performance (potentially variable). Do
m
in
Thus, for every level of desired effort, the principal would have to offer gu
ae fffoixrte da nwda cgoem ppaeynmsaetniot,n w ae*n.d14 gOivnecne tkhnaot,w fno r tnhoe wr,e leaftfioornt sihs ipco nbesitdweereend 1Ion2p otirmdearl ctoo ndteraficnte, tthhee es Waltenberg
observable, the principal would have to specify the optimal effort level
principal will have to
of the agent to be demanded by contract, , and subsequently establish solve the following
problem of optimization
the salary appropriate to such effort level.15 under constraints:
e* Max
The compensation contract or formula derived from the a
e∈e{b e, }w, π( )∫(π–w(π))f(,π |e) dπ
solution of this problem simultaneously serves the interests of both where is the minimum
slae.v. ∫eνl w(ofπ( s)a)tfπ(isef|a)cd πtio–gne( )≥ū
principal – who ensures that the desired effort level will be achieved by demanūded, so that the
agent accepts the contract.
a reasonable cost – and agent – who receives monetary compensation
13
compatible with the effort put into the work and, an aspect of the
The problem of outcome
maximization could be
highest importance, is exempt from the inconvenience caused by
simplified by means of a
unexpected income variation. two-stage-problem: first,
finding the salary that
Even if compensation contracts composed of a fixed and a variable minimizes costs for every
effort level, and second,
part, linked to results – described later in this section – are common in establishing the optimal
effort level. The optimal
other sectors, mainly in commercial activities, in the education sector, compensation should
satisfy the first order
labor contracts with fixed compensation are still prevailing. There are condition provided by:
two possible reasons for that. First, the potential contracting parts may
, where
–rfe p π(ree|s)e n+γt sν tʹhw(eπ (La))g range
not yet have realized the alleged advantages of variable compensation fm π(ue|lti)p =lie 0r. The reγsult
contracts. However, if that were the case, contracting parts who realized obtained is:
1 C
this would have a competitive advantage over others. The conventional ad
e
γ = r
economic theory rests upon the hypothesis of the rational choice; 14νʹw( π( )) no
The agent will receive s d
therefore, it would make no sense to assume that owners of private a salary to meet the e P
participation constraint es
schools would not rationally choose the best contract. The enigma to “without leftovers”: qu
bageo a. nAssw feorre tdh we opuulbdl itch seenc tboer, winh tyh teh aebys ewnocuel do fn porto hfiat vper ecshsousreen ( siet el otnhge gTitneh(hce)eo= ūenwfv,f atoehgnreetir,e esnfhocoreeu,v cilndw(a uaecsd*ov)e dv=dw(gei t rebie(o t*y)n)h + –etū o. isa v.44 n.15
ndiedx tn soetc tgioanin), ipto wpouulalrdi tbye, raesa stohnisa bwleo uthlda t rpeaqyu-ifroer -ppeiorfnoeremr ainncitei astcihveems eosf ratsehuspe mg raeomvsoaaedirnl iazatb gesal dnee(t h bao)oylpts eteir .ononaf ftaeivtr eeledsa, bsty 1 p.37-61 jan
commissioners of education familiar with the model described here. ./m
However, the prevalence of fixed compensation contracts in 1T5he optimal effūort level ar. 20
the education sector could also be due to an inadequacy of contracts is provided by: . 14 45
∫π(fπ(e|)
–1
dπ –ν ʹ ū( +g e())
OS with a variable salary part, given the own nature of labor relations
D
A
ULT in this sector. For example, either because the association between
ES
R R result and effort is deterministic (rather than probabilistic), or because
O
P
ES effort is observable at a low cost, constituting a situation where a fixed
R
O
ESS compensation contract would be optimal, according to the initial
OF
PR version of the model. In education, nevertheless, one must acknowledge
E
D
O that: (i) the association between and is not deterministic (as shown
Ã
Ç
A
ER in the next section); and (ii) effort is not observable at a low cost, as
UN π e
EM previously argued, making it necessary to improve the model, taking
R
M
CO this assumption into account.
AS
M In the framework of the theoretical model, even after this first
E
BL
RO partial presentation, it is already possible to start interpreting some
P
E
CA of the reasons why many people despise accountability programs.
MI
Ô
N This could be attributed, at least partly, to the inconvenience caused
O
C
E
A by the prospect of variable compensation, explained precisely by the
RI
O
TE agents’ risk aversion. The level of risk aversion may vary from person to
person and there is evidence, both from laboratorial experiments and
from the analysis of household surveys (FALK; DOHMEN, 2008), of two
associated stylized facts: (i) that women tend to be, on average, more
risk averse than men; (ii) that teachers tend to be, on average, more risk
averse than the average employee. The loathing of salary uncertainty
would explain part of the resistance to accountability, especially in
a predominantly female labor market, such as the one of educators
(CHEVALIER; DOLTON, 2005).
RESULTS wITH UNOBSERvABLE EFFORT
Agent’s and principal’s goals will come into conflict when the
latter wishes the former to put effort into her work, but the level of effort
is not observable, or is only observable at a high cost. A mechanism that
would possibly motivate an agent to putting the appropriate amount of
effort into her work would be to tie her compensation to the observable
result (pupils’ grades), which, in turn, even if related to the effort, would
still have a random component. In this case, incentives for a high level
4
201 of effort, , would inevitably bring about a given level of fluctuation to
61 jan./mar. the agenAett’ ast hinisc opmoine.t, aside from the participation constraint previously
37- 16
44 n.151 p. MFino rmallπy, theπp rnoebwlπe om, ps utbibmejceizocamtt iteoosn:: edleusciridedat eledv, eal onfe wef fnoerte,d i .eem. meragkeisn: gt oh emr oitnivteartees ttehde iang epnutt ttion gc htohoiss el etvheel
e Pesquisa v. wπ(Wi. )hi∫∫iv.ew ∫c∫rvw(ve o ( w(n(w(()iπsf) π(t )π(ri()saf) f))iet |nf)(h ππ(td)eπ(e,| e |apead)|nabd)dπrπd) t (π–igc i –igi) pe(– gie( as)at e( t≥i)ohbū ≥ne) otchof ene sftpfrorariintn citin”p,t aoal i. hmeTsrh aiwst oinrnkes wuwr iincthogno tushttra atthi nceht ,on oecseaidlnl egfdo trh “ceino dcneesnstaitrnievtde mlceoovnmeilt pooarfti inebgfif loibtryyt
s d incentive compatibility
o constraint, in which a provides the agent with a higher level of net expected satisfaction
n
er denotes the effort level
ad one is willing to choose, than not choosing it.16 (Net satisfaction can be understood as the
46 C and bl odweneor ttehsa na tlehvaetl. difference between the well-being provided by the compensation and