The Impact of Short-term Incentives on Student Performance

September 2011
Steven Levitt, John List, Susanne Neckermann, Sally Sadoff

Although direct financial incentives are prevalent in nearly all walks of life, they are rarely used on students. Most prior studies of incentives have focused on interventions that operate over a time horizon of months or years, typically yielding small positive impacts. In this paper, we report on the results of immediate and transitory incentives implemented among elementary and high school students in three school districts. We announce the incentives immediately before a standardized test, isolating the role of short-term effort in achievement. We also vary both the type of incentives (financial and non-financial) and their framing (as gains and as losses). We find that incentives affect student performance, although there is substantial variation across settings. Incentives framed as losses have consistently large effects relative to other educational interventions (0.12-0.22 standard deviations). We find mixed evidence on the impact of incentives framed as gains with large effects in two school districts (0.2-0.4 standard deviations) and no effects in the third. We also find that that while older students are more responsive to financial incentives, non-