Alex Tabarrok writes at MR about how performance pay for teachers has led to student improvements. It appears that students are not only performing better on tests, but that this improved performance translates well into real-world abilities and performance.
I don’t deny the results of this study, obviously, but I do think that a word of caution is in order. India has a long way to go in matching the Western world’s academic achievement. As such, performance tests will remain meaningful for some time. In America, though, most performance tests are not particularly meaningful because there isn’t nearly as much intellectual/academic variance among students. Every student is functionally literate and numerate, and that helps reduce variance. The same is not true in India, and until it is, test performance will generally translate well into real-world performance. Once India gets close to universal literacy and numeracy, the gaps between students disappear, and performance testing will hit a rapidly diminishing point of return, because most students will be mostly interchangeable.