6 Arbitrary Variation in Teacher Salaries: An Analysis of Teacher Pay in Bolivia

Understanding teacher compensation is important in developing countries, where teacher pay accounts for most educational expenditures. Although teacher compensation schemes have been criticized by economists, largely because of their perceived rigidity, only a limited set of studies seem to consider their details. Most research on teacher compensation has focused on how well teachers are paid relative to comparable individuals in other occupations.60 One exception is Morduchowicz (2002), which reviews the salary structures of several Latin American countries and describes the most common determinants of teacher pay. This study differs from the previous literature in that we are less con-cerned with how well teachers are paid and more interested in exactly what is remunerated in a specific salary structure—that of Bolivia. As in Morduchowicz (2002), we focus on understanding the incentives embedded in teacher pay. We not only provide a description of its structure, but als