Wednesday, April 28, 2010

Financial incentives-based educational reforms

In recent years, there have been an increasing body of research exploring the role of incentive-based education reform and its impact on the dynamics of student motivation. However, there exists considerable debate about whether incentives for inputs or outputs are more effective in increasing student achievement.

A recent NBER working paper by Roland Fryer describes school-based randomized trials in 261 urban public schools in Chicago, Dallas, New York City, and Washington DC that distributed financial incentives worth $6.3 mn to roughly 38000 students so as to test the impact of financial incentives for various inputs and outputs on student achievement and finds that

"In stark contrast to simple economic models, our results suggest that student incentives increase achievement when the rewards are given for inputs to the educational production function, but incentives tied to output are not effective. Relative to popular education reforms of the past few decades, student incentives based on inputs produce similar gains in achievement at lower costs. Qualitative data suggest that incentives for inputs may be more effective because students do not know the educational production function, and thus have little clue how to turn their excitement about rewards into achievement."

The experiments varied from city to city on several dimensions - what was rewarded, how often students were given incentives, the grade levels that participated, and the magnitude of the rewards. The key features of each experiment consisted of monetary payments to students (directly deposited into bank accounts opened for each student or paid by check to the student) for performance in school according to a simple incentive scheme. In all cities except Dallas, where students were paid three times a year, payments were disseminated to students within days of verifying their achievement. Students were paid for inputs like reading a book (or lesson), attendance, good behavior, wearing their uniforms, and turning in their homework.

Prof Fryer finds that providing incentives for achievement test scores has no effect on any form of achievement measured; there is scant evidence that total effort increased in response to the programs, though there may be substitution between tasks; also no evidence that incentives decrease intrinsic motivation; and that input experiments seem positively associated with motivation and output experiments seem negative. However, the point estimates on all these are too small and the standard errors are too large to conclude that financial incentives are a game-changer in educational reforms. He concludes

"Relative to achievement-increasing education reform in the past few decades – Head Start, lowering class size, bonuses for effective teachers to teach in high need schools – student incentives for certain inputs provide similar results at lower cost. Yet, incentives alone, like these other reforms, are not powerful enough to close the achievement gap."

About the theory that students do not understand the educational production function and, thus, lack the know-how to translate their excitement about the incentive structure into measurable output, he writes,

"Students who were paid to read books, attend class, or behave well did not need to know how the vector of potential inputs relates to output, they simply needed to know how to read, make it to class, or sit still long enough to collect their short-term incentive...

There are three pieces of evidence that support this theory. First, evidence from our qualitative team found consistent narratives suggesting that the typical student was elated by the incentive but did not know how to turn that excitement into achievement. Second, focus groups in Chicago confirmed this result; students had only a vague idea how to increase their grades. Third, there is evidence to suggest that some students – especially those who are in the bottom of the performance distribution – do not understand the production function well enough to properly assess their own performance, let alone know how to improve it.

Three other theories are also consistent with the experimental data. It is plausible that students know the production function, but that they lack self-control or have other behavioral tendencies that prevent them from planning ahead and taking the intermediate steps necessary to increase the likelihood of a high test score in the future. A second competing theory is that the educational production function is very noisy and students are sufficiently risk averse to make the investment not worthwhile. A final theory that fits our set of facts is one in which complementary inputs (effective parents, e.g.) are responsible for the differences across experiments."


rukesh said...

"Winning comes with Experience and Experience comes with failures"

I write this as I've been through the cycle of failures before I was success in my education.

Imagine this.."A kid who is below average in studies, ends up @ prestigious Harvard University for Graduation." Guess who.. Its me.

How did it happen ? Your last statement about Complementary Inputs (Parents), did the trick for me. Persistent parents helped me concentrate on studies rather than sports/other interests.

So, to sum in up, be it in USA or India or any where in the world, outside factors influence children’s education a lot, be it social, financial , peer pressures or pure circumstantial.

I don’t believe Financial Incentives would work or the correct way to go, since children have short memory span about the incentives they will get ( out of site..out of mind ) and/or can they appreciate the value of monetary benefits in real world. So, I think, any kind of incentives will not last as a real motivator.

Rather I would prefer, kids introduced to achieved & successful role models (Bill Gates & Kalam’s of the world) who can inspire & be imprinted on their little minds , will help them raise up to the standards as a successful global citizen.

- Rupesh Surapaneni
Jacksonville, FL

rukesh said...

let me play devil’s advocate for a moment..

Did any one find these studies, started with a presumption that, financial incentives in some way, may help kids getting interested in education ? Who would commission such studies on proving a non-theory with sagacity ?

If I have to commission a research to identify " How to make kids more interested in education (input/output) " , I would expect them to research ways from inside out, rather than, run a tangent & try to prove/disprove, one idea over the other.

PS: Oh well, i retire to think that If i am sitting at one end of the room with my thoughts running inside out... i assume, my counterpart on the other end of the room, doing a reverse engineering of my thoughts. Then this study makes perfect sense., that every tiny brain has its own thought track on approaching a problem.


Anonymous said...

I don’t understand why this post is, first of all.

What is it?

Financial incentives to students for inputs and output and “studies” confirm that financial incentives for inputs yield promising results rather than giving incentives for output. This is because; students could not understand the production function of (educational) achievement.

What is this argument?

What are these high sounding words like production function?

What do you think of educational system, employment creation status and consumer driven-nonproductive services sector pull base of economy, particularly in India?

Do you think that students are not aware of production function of education?

Do you think that a student of 6th standard attending for IIT foundation course is not known his production function of this ordeal?

It is definitely wrong side of the coin.

We, at India, are still trying to attract students to school by ways from mid-day meal scheme to scholarships to total fee re-imbursement.

What is all this for?

Just to stop the students to be away from the school.

Why they are away from the school?

Is it because that they do not know the production function of their schooling/education?


Is it because that they know that the alternate production function seems to be more beneficial than the production function of education in the present vicious circle of unemployment and underemployment?

It is hence definitely the other side of the coin is also wrong.

gulzar said...

thanks for the comments.

this post was not intended to neither support nor oppose financial incentives for students. it was only meant to draw attention to a study that appeared to clarify that if financial inncentives were to be given to students, it was better to give it for inputs (that go into producing results/marks) rather than for outcomes (marks themselves).

i agree with rupesh (and this has been proved conclusively) that external factors (parents, environment etc) play a more immportant role in influencing children's school performance.

anon makes the point that students face an alternate production function that appears more beneficial than the prodn fxn of edn and encourages them to stay out of school. i agree. but the issue undeer discusssion here and the reference to financial incentives is about getting the optimum results out of a student who is already in school.

About whether students understand the most optimal mixture of inputs to the prodn function so as to generate the best possible results (given their intelligence/talent and amount of hardwork put in), one only needs to look at the example quoted by you - trying to gain entrance to IITs or IAS or even passing 10th class exams.

Surely, a student studying in a more focussed manner (how much time for each subject, what types of questions, solving previous question papers, which topics in each subject etc) stands a much better chance of him being able to crack these exams. and since the students are not fully aware of these, they attend coaching classes.

there is also the possibility that from among many different learning methods, students may choose only one (say reading text books over doinng workbooks) and in the process lower the value of his prodn fxn.

Anonymous said...

Thanks for the response on my comments.

My argument is to stress the point that students as well as parents are aware of the production function of education, irrespective of the fact whether the student is in the school or outside the school.

Financial incentives for inputs may psychologically restrain students rather than improve themselves. How?

Financial incentives are useful to encourage the students who are qualitative, that is, who are able to understand the concepts and content of the curriculum. Those who are not qualitative, these financial incentives may work dysfunctional in terms of Durkhiem.

Financial incentives may be useful to be incentive for students for the inputs for which application of mind is not required. For example, attending to school regularly, observing descipline in the class room etc.

But, the financial incentives will work in just opposite direction in completing home work and reading and understanding the lesson etc. which also develops hostile feelings with peer group.

Why? Qualitative improvement depends on how effectrively the teacher taught and the pains taken by the school environment to make student confortable in understanding that was taught. Alternatively, giving financial incentives to teachers for quality teaching may be considered here.

The studies like those referred are very closed and mechanically correlating using some statistical techniques. Studies and researches like these using extensively econometrics without concern to the human factor making Economics an inert science. Economics, afterall, a social science. Statistical tools are methods and not methodologies.

As a true student of economics, I always feel painful observing studies like these.

Thanks for patient reading.