Teacher labor markets and the perils of using hedonics to estimate compensating differentials in the public sector

Some scholars and policymakers who are concerned about the inequitable distribution of quality teachers suggest offering financial incentives for working in hard-to-staff schools. Previous studies have estimated compensating differentials using hedonic modeling, an approach potentially undermined by district-wide salary schedules and the lack of labor market competitiveness. To address this problem, we build hedonic wage models for both public and private schools using data from the 1999–2000 Schools and Staffing Survey and the 2000 Census. Empirical estimates suggest that both public and private schools compensate teachers for some working conditions, but there also appear to be differences between public and private schools in the magnitude of the compensating differentials, particularly for teaching low-income students.