Association for Public Policy Analysis & Management

How do individual-level teacher incentives impact the black-white achievement gap? We present a simple theoretical model predicting that performance pay may exacerbate the gap, and draw on administrative education data from North Carolina to test this prediction. Using a difference-in-differences approach, our estimates suggest that performance pay considerably increases the conditional black-white gap. This is especially true in classrooms where a majority of students are white, which we interpret as consistent with teachers responding to performance pay by allocating additional effort towards the students they (possibly mistakenly) perceive as high ability in order to increase average class achievement.