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

• Authors: Gianmarco León-Ciliotta.
• BSE Working Paper: 110747 | July 21
• Keywords: inequality , teacher school choice , teacher wages , matching with contracts
• JEL codes: J31, J45, I21, C93, O15
• inequality
• teacher school choice
• teacher wages
• matching with contracts

We exploit data on the universe of public-school teachers and students in Per´u to es- tablish that wage rigidity makes teachers choose schools based on non-pecuniary factors, magnifying the existing urban-rural gap in student achievement. Leveraging a reform in the teacher compensation structure, we provide causal evidence that increasing salaries in less desirable locations is effective at improving student learning by attracting higher- quality teachers. We then build and estimate a model of teacher sorting across schools and student achievement production, whereby teachers are heterogeneous in their pref- erences over non-wage attributes and their comparative advantages in teaching different student types. Counterfactual compensation policies that leverage information about teachers’ preferences and value-added can result in a substantially more efficient and equitable allocation by inducing teachers to sort based on their comparative advantage.