Do teachers’ wages matter for proficiency? Evidence from a funding reform in Brazil

This paper uses the 1998 reform in the funding of fundamental education in Brazil (FUNDEF) to identify the effect of teachers’ wages on the proficiency of public school pupils. Wages are set by legislation at the local level and this reform established a floor on the share of expenditures on teacher wages out of total revenues in each Brazilian State and Municipality. The evidence using micro-data suggests that increases in relative wages within the public system brought about by the reform had a positive impact on the students’ proficiency.