Centralized Deployment and Teachers ’ Incentive: Evidence from Reforms in Rural China∗

This paper studies the impact of deployment centralization on teachers ’ effort and student achievement by exploring the reforms of rural education system in China. As regular teachers ’ payroll was moved from xiang (or school district) up to county government in 2001, the power of deployment was gradually transferred along the same line. We exploit variations in transfer timing and use as comparison contract teachers who were not directly affected. Teacher data collected from Gansu province in 2000 and 2004 show that, the increase of regular teachers ’ effort relative to contract teachers in those xiangs having centralized deployment by 2003 is smaller than those where the transfer had not occurred. Student test scores also had a smaller increase in centralization xiangs. Exploration into teacher allocation and wages suggests a likely channel: the implementation of performance pay is hindered as personnel in-terventions from upper-level government noises teachers performance evaluation. ∗We are indebted to Albert Park for providing the GSCF data and the East Asian Development Net-work for sponsoring the Gansu Survey on School Governance (GSSG). We also thank Tao Li, Michae