The Effect of Performance-Based Incentives on Educational Achievement: Evidence from a Randomized Experiment

We test the effect of performance-based incentives on educational achievement in a low-performing school district using a randomized field experiment. High school freshmen were provided monthly financial incentives for meeting an achievement standard based on multiple measures of performance including attendance, behavior, grades and standardized test scores. Within the design, we compare the effectiveness of varying the recipient of the reward (students or parents) and the incentive structure (fixed rate or lottery). While the overall effects of the incentives are modest, the program has a large and significant impact among students on the threshold of meeting the achievement standard. These students continue to outperform their control group peers a year after the financial incentives end. However, the program effects fade in longer term follow up, highlighting the importance of longer term tracking of incentive programs.