POLITICIANS around the world love to promise better education systems. Proposals for reform come in many flavours. Some tout the benefits of more competition among schools; others aim to train more teachers and reduce class sizes. Still others plump for elaborate after-school programmes or for linking teachers' pay to how well pupils do.
A relatively recent addition to this menu is the idea of paying students directly for performance. Boosters argue that pupils may fail to invest enough time and effort into education because the gains--better jobs and higher incomes--are nebulous and distant. Cash payments, on the other hand, reward good performance immediately. Link payments to test results or graduation rates, the argument goes, and test scores should increase and drop-out rates decline. Two new papers* describe the effect of such schemes in Israel and America. Their results will disappoint those who hope for a silver bullet. But they also suggest that cash payments may have their uses in some situations.
Joshua Angrist of the Massachusetts Institute of Technology and Victor Lavy of the Hebrew University in Jerusalem studied high-school students in 40 Israeli schools where few pupils went on to get their school-leaving certificate (the Bagrut). In half the schools students were offered a chance to earn nearly $1,450 if they passed all the tests and got the certificate. The economists found that completion rates in "payment schools" increased by about a third--but only for girls and mainly for those who needed to do only a tiny bit more to graduate.
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