| Summary: | <p>This study provides structural analysis of teacher behaviour under the provision of individual and group monetary incentive schemes using data from a randomised control trial conducted in India (Muralidharan and Sundaraman, 2011). I develop a theoretical principal-agent model explicitly allowing for both intrinsic motivation and a crowding out effect of explicit performance pay on intrinsic incentives. Theoretically, I show that intrinsic motivation and extrinsic motivation through performance pay are substitutes under the optimal incentive scheme in the presence of motivation crowding out. Applying the theoretical framework for structural analysis, I identify the sets of teacher heterogeneity consistent with each effort choice in the treatment and control group schools. Using the barycenters of these sets, I calculate that increasing the effort of the average teacher who did not change his/her effort under the experimental incentive payment of Rs. 500, would require increasing the incentive bonus to Rs. 730 under the individual incentive scheme. The corresponding figure lies between Rs. 720 - Rs. 1020 depending on the reported group cooperation level under the group incentive scheme.</p>
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