Students attending low-performing schoolstend to perform better on tests when promised financial or non-financial incentives for good scores, according to a study conducted by Freakonomics’ Steven D. Levitt, John A. List, Susanne Neckermann and Sally Sadoff.
Between January 2009 and January 2011, the researchers conducted randomized field experiments among 6,500 elementary and high school students in three low-performing school districts in and around Chicago. The three settings differed in terms of size, age of the students and subject being tested.
Low financial incentives of $10 -- offered for an improvement in test scores and announced immediately before the test -- elicited effort in only one setting, whereas high financial incentives of $20 worked well in two out of the three settings.
Additionally, findings suggest that older students respond more to monetary incentives, while non-monetary incentives -- such as trophies -- are as effective as financial incentives among younger students.
Rewards that were promised to students one month after the test, rather than immediately following the test, had no motivating power.
The study found that boys are more responsive to short-term incentives than girls, and effects are more pronounced for math tests compared to reading exams.
Furthermore, incentives framed as “losses” rather than “gains” elicited significantly higher effort. For example, if students were given $20 and told it would be taken away if they performed poorly.
Overall, the researchers conclude “both financial and non-financial incentives can serve as useful tools to increase student effort and motivation on otherwise low-stakes assessment tests.”
Additionally, the Atlantic’s Derek Thompson writes, “The trouble for many schools is that the incentive structure is set up so that teachers focus more than their students on standardized tests. These tests are super-high-stakes for instructors and principals, where they can determine who keeps a job and where state resources are spent. But they are relatively low-stakes for individual students in the short-term, especially if those students aren't looking to go to college and don't care very much about a weak grade.”
In February, a Cincinnati charter school resorted to paying students in weekly Visa gift cards for showing up to class every day, being on time and behaving in school. The school’s principal told the Associated Press that the program was successful in boosting attendance.
Elsewhere, schools in Virginia paid students $100 in cash for scoring well on Advanced Placement exams.

Huff Post Education, June21,2012