2014 or 2016 has been used. * Given to Kepulauan Seribu only. Source: Monthly per student value of grant and number of schools reported from Jakarta government education management information system.

The introduction of the performance component was designed to create stronger incentives at the school level to use resources more effectively to improve learning. Historically, schools have used a significant proportion of their discretionary funds to hire contract teachers (World Bank 2015). Unlike in some other countries, however, the hiring of additional teachers has not been associated with improvements in learning partly because student teacher ratios and class sizes were already relatively low (World Bank 2013). The performance component was designed to align the schools’ use of resources more centrally with learning.

At the time of its design, it was assumed that the performance component would improve learning outcomes through two main channels. First, the announcement of the grant alone was expected to increase effort among teachers and other actors to improve levels of learning. For example, the announcement of the grant was expected to raise teacher effort through increases in teacher attendance, greater time on task during lessons and greater lesson preparation. Second, it was predicted that the introduction of the grant would encourage schools to align their funding more closely to the objective of improved learning. It was also expected that learning outcomes would be further enhanced for schools that received the grant because additional activities to raise learning could be supported.

**Table 3: Government schools receiving 2015 performance component and average** **<u>improvement in performance</u>**

||School perfor<br>exa<br>|mance quartiles<br>minationscore|based on aver<br>in 2013 and2|age of national<br>014<br>||
|---|---|---|---|---|---|
||Bottom|||Top|All|
||performance<br>quartile|Quartile 2|Quartile 3|<br>performance<br>quartile|schools|
|**Average examination score**|**2013/14: all government**|**schools**||||
|Primary|63|71|76|83|74|
|Junior Secondary|70|73|76|83|76|
|**Percentage of government sc**|**hools in each quartile r**|**eceiving perfo**|**rmance grant**|**in 2015**||
|Primary|3|12|26|62|26|
|Junior Secondary|0|6|19|75|25|
|**Average examination score**|**2013/14: only schools re**|**ceiving perfor**|**mance grant i**|**n 2015**||
|Primary|66|72|77|84|80|
|JuniorSecondary|-|73|77|83|82|

Note: Average scores and percent of grant recipients in 2015 were calculated using UN scores data from Puspendik and performance grant data from Jakarta government. Excludes schools in Kepulauan Seribu district.

Despite efforts during design to give all schools an equal opportunity to compete, the data show that schools with higher overall performance at the outset were more likely to get the performance grant. The decision to include the percentage point change in examination scores was taken to encourage low performing schools to compete for the grant. Without this, only high performing schools would receive the grant. Due to annual changes in content and design, national examination scores in Indonesia are not comparable over time. However, it is instructive to look at the average improvements in scores needed to secure the performance component for high and low performing schools (Table 3). Schools that received the performance grant were disproportionately drawn from the top performance quartile which is constructed by averaging 8