Does it pay to pay teachers more? Evidence from Texas

• Increasing teacher pay reduces teacher turnover, primarily among less experienced.
• Estimators robust to arbitrary changes in district and labor market characteristics.
• Increasing teacher pay reduces turnover, which improves student achievement.

This study presents robust evidence on the relationship between teacher pay and turnover using detailed panel data from Texas. While controlling for changes in district and local labor market characteristics, I estimate an overall turnover elasticity of − 1.4 and show that the effect is largest for inexperienced teachers, declines with experience, and disappears around 19 years of experience. Combining these results with what we know about the relationship between teacher value-added and experience, I show that paying teachers more improves student achievement through higher retention rates. The results also suggest that adopting a flat salary schedule may be a cheap way to improve student performance. I find no evidence that pay effects vary by the teacher's gender or subject taught.