This article presents a principal-agent model in the context of public schools to help explain the use of merit pay for teachers. The model considers how both the nature of teaching and the political costs of union resistance affect school district merit pay decisions. Our results support the idea that merit pay is more likely in environments…

There is significant public policy concern that teacher salaries in the United States are insufficient to make teaching in public schools financially attractive; consequently, there are not enough high-quality teachers. This concern has been particularly acute of late for two reasons. First, new empirical research shows teacher quality to be the…