Individual Teacher Incentives, Student Achievement and Grade Inflation
Pedro S. Martins
School of Business and Management
Queen Mary, University of London

This March 2009 study examines the impact of teacher performance-related pay on the performance of Portugal's public school students.  The results consistently indicate that the increased focus on individual teacher performance caused a significant decline in student achievement.

The "student achievement results are consistent with the potential for disruption in collaborative work in schools created by tournaments for promotions and prizes.  On the other hand, the increase in grade inflation can be explained by the emphasis placed by the new promotion criteria on student results."

Full Report Here