Several years ago I reported on a very large, randomized experiment (JSTOR) on teacher performance pay in India that showed that even modest incentives could significantly raise student achievement and do so not only in the incentivized subjects but also in other non-incentivized subjects, suggesting positive spillovers. The earlier paper looked at the first two years of the program. One of the authors, Karthik Muralidharan, now has a follow-up paper, showing what happens over 5 years. The results are impressive and important:

Students who had completed their entire five years of primary

school education under the program scored 0.54 and 0.35 standard deviations (SD) higher than

those in control schools in math and language tests respectively. These are large effects

corresponding to approximately 20 and 14 percentile point improvements at the median of a

normal distribution, and are larger than the effects found in most other education interventions in

developing countries (see Dhaliwal et al. 2011). Second, the results suggest that these test score gains represent genuine additions to human

capital as opposed to reflecting only ‘teaching to the test’. Students in individual teacher

incentive schools score significantly better on both non-repeat as well as repeat questions; on

both multiple-choice and free-response questions; and on questions designed to test conceptual

understanding as well as questions that could be answered through rote learning. Most

importantly, these students also perform significantly better on subjects for which there were no

incentives – scoring 0.52 SD and 0.30 SD higher than students in control schools on tests in

science and social studies (though the bonuses were paid only for gains in math and language). There was also no differential attrition of students across treatment and control groups and no

evidence to suggest any adverse consequences of the programs. …Finally, our estimates suggest that the individual teacher bonus program was

15-20 times more cost effective at raising test scores than the default ‘education quality

improvement’ policy of the Government of India, which is reducing class size from 40 to 30

students per teacher (Govt. of India, 2009).

In another important paper, written for the Government of India, Muralidharan summarizes the best research on public schools in developing countries. His conclusion is that there are demonstrably effective and feasible policies that could improve the public schools thereby increasing literacy and numeracy rates and raising the incomes of millions of people.

The generation entering Indian schools today is the largest that has ever, or for the foreseeable future, will ever enter Indian schools so the opportunity to raise educational quality for essentially the entire Indian workforce over the next several generations is truly immense.