Can financial incentives enhance educational outcomes? Evidence from international experiments

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 transfers programmes 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. This article reviews research on effects of conditional cash transfers and other financial incentive schemes on educational outcomes. Research in developing countries has found that providing families with significant financial incentives modestly increases secondary students’ attendance. Effects on graduation rates and on actual learning are less well documented. In developed countries the evidence is less supportive.