Chau Fu, University of Wisconsin-Madison

Proper allocation of public servants across local employers is often hampered by a major institutional friction: wage rigidity. Via the lens of the market for public-school teachers, we study the equilibrium equity-efficiency implication of this friction. In our model, teachers differ in their comparative advantages in teaching low- or high-achieving students. School districts, which serve different student bodies, use both wage and hiring strategies to compete for their preferred teachers. We estimate the model using data from Wisconsin, where districts gained control over teacher pay in 2011. We find that, all else equal, giving districts control over teacher pay would lead to more efficient teacher-district sorting but larger educational inequality. Teacher bonus programs that incentivize comparative advantage-based sorting, combined with bonus rates favoring districts with more low-achieving students, could improve both efficiency and equity.

DATE: Friday, March 18th, 2022

TIME: 3:30-5:00pm EST

LOCATION: ZOOM Meeting ID: 942 8492 2150