Richard J. Murnane and David K. Cohen use the framework of microeconomics to account for the short lives of most merit pay plans. They demonstrate that teaching is not ‘an activity that satisfies the conditions under which performance-based pay’ is an efficient method of compensating workers. They then show that merit pay plans survive in a few school districts, in part because the districts are special and in part because the merit pay plans are quite dffferent from conventional notions of performance-based pay.

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