the incentive scheme did increase the effort of recruiters and led to the recruitment of more high-quality candidates, but also induced recruiters to exhibit a form of gaming behavior, i.e. increasing recruiting efforts early in the cycle and once an expectation of reaching the bonus level was achieved, a reduction of effort for the remaining evaluation time followed.<sup>6</sup>

# **Teaching**

The literature on performance pay for teachers, an essentially craft job, also shows a variety of research designs. Some researchers use qualitative case studies (Murnane and Cohen 1986) or perception surveys of teachers subject to performance pay to measure effects on performance (Heneman III and Milanowski 1999; Kelley 1999). These studies often show a low degree of satisfaction with bonus systems and explicit evaluation. By contrast, studies focusing on actual outcomes often find rather encouraging results. A series of papers use the introduction of performance pay for teachers to quantitatively assess the effects on student outcomes. By now studies have utilized various data sources and structures to assess the effects of performance programs.

In the American context researchers have evaluated the effects of teacher quality on student outcomes (Goldhaber and Brewer 2000; Hanushek and Rivkin 2006; Clotfelter, Glennie, et al. 2007). Since performance pay is argued to be one important tool for attracting and retaining highly-qualified teachers, it is important to determine the effectiveness of merit systems in that regard. (Clotfelter, Diaz, et al. 2004; Clotfelter, Glennie, et al. 2008) show, using detailed data from North Carolina's schools, that accountability and performance pay systems contribute positively to retaining quality teachers. The introduction of merit pay can also be linked to student test scores, but with varying empirical robustness. (Cooper and Cohn 1997) find for a sample of over 500 South Carolina classes a positive effect of merit awards for teachers on mathematics and reading test score achievements.

Cross-sectional studies using data from the American National Educational Longitudinal Survey have been used to show a positive link between individual merit awards for teachers and student test scores (Figlio and Kenny 2007). Positive effects of performance pay have also been found in Arkansas kindergartens (Winters, Ritter, et al. 2009). To mitigate problems of causal inference, sometimes researchers can use difference-in-difference estimation, due to the geographic difference of the phasing-in of reforms (Eberts, Hollenbeck, et al. 2002; Atkinson, Burgess, et al. 2004). While (Eberts, Hollenbeck, et al. 2002) find no effects on student test scores and even slightly negative effects on other outcomes, their analysis relies on student-level data from only two schools. A more thorough and systematic differencein-difference analysis by Atkinson et al. finds clear positive effects of performance pay for British schools. By utilizing particular features of Tennessee's Career Ladder System and the Project STAR field experiment, (Dee and Keys 2004) are able to link teachers' quality assessments, as expressed in the career ladder grouping, to student test scores. They find that the official career ladder system had only mixed success in rewarding teachers with the highest test score gains, but nonetheless teachers with merit awards had positive effects on student's math scores. They found however no statistically significant effects on reading scores.

> 6 An early observational study which revealed significant gaming is noted in (Wilms and Chapleau 1999) who note that performance-based pay began in the UK in about 1710, with salaries based on test scores in reading, writing and arithmetic. The rationale was that it would help keep students from poor families in school, where they could learn the basics. In reality, the incentives encouraged teachers to narrow the curricula to include only easily assessed subjects, and cheating by both inspectors and teachers made the system ultimately untenable. The system was dropped in the 1890s. A similar scheme was introduced briefly in Canada in 1876, but it ran into similar difficulties and was terminated around the same time.

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