Working Papers

Max Perez Leon
Inducing Teacher Retention in Remote Locations: Evidence from Peru [Job Market Paper]

Abstract In this paper, I estimate the extent to which cash bonuses retain teachers in remote locations of Peru. Many governments utilize financial incentives to fill education and health care positions in undesirable locations. The Peruvian public education system is an ideal ground to study the effectiveness of such policies. As part of a larger education reform in 2015, the Peruvian government implemented a salary bonus scheme favoring regions far from urban centers. Because the bonuses are added to base salaries that are uniform across regions, teachers face wage offers that change discontinuously across space. These discontinuities allow the use of well-developed program evaluation methods. Specifically, I apply a matching estimator to a boundary discontinuity design to recover the average treatment effect on the treated at the (unknown) boundary of the bonuses. I find that the bonuses offered by the Peruvian government have a heterogeneous effect: temporary teachers react to the bonuses with a sizeable increase in their retention rate, while permanent teachers with tenure respond very little. One explanation is that permanent teachers choosing these remote locations have a much higher retention rate to begin with.

Work in progress

Jorge Chavez, Antonio Cusato and Max Perez Leon
The impact of drawback subsidies on Peruvian exporting firms