Testing implications of a tournament model of school district salary schedules

Using panel data on the salary schedules of public school teachers and administrators, I look for evidence of a tournament wage structure. A tournament model is presented, where teachers compete for promotion to administrators. Districts can create incentives for teachers by offering either a higher pay premium for promotion or a larger probability of promotion. The model predicts an inverse relationship between these two values. Evidence supporting this prediction is found in the data. In contrast, an alternative model of incentive pay, where returns to seniority substitute for imperfect monitoring, is not supported empirically. This result is consistent with intuition that tenure protections make it hard for districts to fire shirking teachers, making returns to seniority a poor method of providing incentives.