EDUCATIONAL OUTCOMES IN OECD COUNTRIES
39
closely linked together. The international evidence clearly suggests that school
autonomy, in particular local autonomy over teacher salaries and course content, is only
effective in school systems that have external exams in place (Woessmann (2005b,
2007b); Fuchs and Woessmann (2007); Woessmann, Luedemann, Schuetz, and West
(2009)). For example, school autonomy over teacher salaries is negatively associated
with student achievement in systems without external exams, but positively associated
with student achievement in external-exam systems. This pattern of results has been
found in several different TIMSS and PISA studies and in analyses of autonomy in other
decision making areas such as school autonomy in determining course content and
teacher influence on resource funding. Similar evidence that accountability policies are
more effective when there is greater local control has also been found across U.S. states
(Loeb and Strunk (2007)).
Finally, given the importance of high teacher quality, a promising candidate for
improvement is the specific form of accountability that aims incentives directly at
teachers. While convincing evidence on the effects of performance-related teacher pay
is scarce, the more rigorous studies in terms of empirical identification tend to find a
positive relationship between financial teacher incentives and student outcomes (cf. the
surveys in Atkinson et al. (2009) and Podgursky and Springer (2007); see also Figlio and
Kenny (2007)). Thus, Atkinson et al. (2009) find that the introduction of performance-
related pay had a substantial positive impact on student achievement in England.
Similarly, monetary incentives for teachers based on their students’ performance have
been shown to improve student learning very significantly in Israel and in India (Lavy
(2002, 2009); Muralidharan and Sundararaman (2009)). Likewise, the cross-country
variation provides some indication that students perform better in countries that allow for
teacher salaries to be adjusted based on performance in teaching (Woessmann (2010a)).
Clearly, research on how school policy can successfully advance educational
achievement is an expanding field that still leaves many open questions. At the same
time, our reading of the available evidence is that institutional reforms - in particular in
the areas of competition, autonomy, and accountability - that create incentives for
improving outcomes and focus in particular on teacher quality have substantial potential
to create the kinds of learning gains that our results above show to be linked to immense
long-term economic benefits.
7. CONCLUSIONS
It is generally the case that national attention to economic policies that deal with
current aggregate demand conditions and with business cycles invariably take priority
over longer-run policy considerations. Perhaps this has never been as true as today,
when the most obvious focus of attention is the worldwide recession. Without
minimizing the need to deal with current unemployment conditions, the message of this
paper is that considering issues of longer-run economic growth may be more important
for the welfare of nations. Nobel Laureate Robert Lucas, in his presidential address to
the American Economic Association, concluded that “Taking US performance over the