DP16386 Teacher Compensation and Structural Inequality: Evidence from Centralized Teacher School Choice in Peru

Author(s): Matteo Bobba, Tim Ederer, Gianmarco León-Ciliotta, Christopher Neilson, Marco Nieddu
Publication Date: July 2021
Keyword(s): Inequality, Matching with Contracts, Teacher School Choice, Teacher Wages
JEL(s): C93, I21, J31, J45, O15
Programme Areas: Labour Economics, Public Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16386

This paper studies how increasing teacher compensation at hard-to-staff schools can reduce inequality in access to qualified teachers. Leveraging an unconditional change in the teacher compensation structure in Peru, we first show causal evidence that increasing salaries at less desirable locations attracts better quality applicants and improves student test scores. We then estimate a model of teacher preferences over local amenities, school characteristics, and wages using geocoded job postings and rich application data from the nationwide centralized teacher assignment system. Our estimated model suggests that the current policy is both ineâ??cient and not large enough to effectively undo the inequality of initial conditions that hard-to-staffâ??schools and their communities face. Counterfactual analyses that incorporate equilibrium sorting effects characterize alternative wage schedules and quantify the cost of reducing structural inequality in the allocation of teacher talent across schools.