Can Financial Incentives Enhance Educational Outcomes? Evidence from International Experiments

Abstract

In recent years, there has been a revival of interest in financial incentives to encourage students to attend school and to improve their academic achievement, graduation rates, and other outcomes. Conditional cash transfer programs in developing countries, especially PROGRESA in Mexico, have found positive effects on attendance in large-scale randomized experiments, and this has encouraged similar initiatives throughout the world, including programs currently under way in New York, Washington, DC, and Chicago. This article reviews research on effects of conditional cash transfers and other financial incentive schemes on educational outcomes. Major findings of the review are as follows.