Visiting Speaker: Chao Fu, University of Wisconsin-Madison
Presentation Title: Information Frictions and the Labor Market for Public School Teachers
Abstract:
Extensive research has suggested that effective teachers play an instrumental role in student success as measured by student academic achievement and future labor market outcomes. Therefore, it is crucial for economic growth and intergenerational mobility to improve the effectiveness of all teachers and to equalize the allocation of effective teachers to schools regardless of the student bodies they serve. One of the major obstacles to achieving this goal is information friction:
Teacher effectiveness is not strongly correlated with observable characteristics (e.g., education and experience), which makes it hard to identify effective teachers upon hire. Moreover, to the extent that a school can learn about a teacher's effectiveness by observing her performance, a teacher's current employer has information advantages about her quality over other schools. It is well known that asymmetric information between current and prospective employers may obstruct optimal allocation on the labor market in general (e.g., Waldman 1984; Greenwald 1986; Chang and Wang 1996; Waldman and Zax 2016). Information asymmetry on the labor market for public school teachers is accompanied with two distinct features of this market. First, in most public school districts, teacher salaries follow a rigid schedule imposed on all schools within a district, leaving little variation in compensation across schools for the same teacher. As a result, the relative attractiveness of a school largely lies in non-pecuniary factors, such as the body of students it serves. Second, in a typical labor market, optimality is largely equivalent to efficiency, i.e., labor allocation that maximizes the total output is optimal. However, in the case of teacher
school sorting, equity - providing students with equal access to effective teachers - is at least as important as efficiency in defining optimality.
Host: Victoria Barone