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Effects of Monetary Incentives on Teacher Turnover: A Longitudinal Analysis

Teacher turnover has been reported as a strong predictor for students’ academic achievement, yet little is known about the determinants of teacher turnover. Using a fixed effects model, we analyze panel data of individual teachers in North Carolina schools to test the effects of monetary incentives on teacher turnover. We find a U-shaped relationship between teacher salary and turnover, while the effects of group-based merit pay on turnover depend on salary level. Assuming that a teacher’s salary reflects their qualifications, the current study concludes that overqualified and underqualified teachers are likely to leave and that group-based merit pay causes turnover among qualified teachers.