Are Public Sector CEOs Different? Leadership Wages And Performance In Schools

This paper uses a unique data set to investigate the link between the pay and performance of school principals. It is frequently argued that public sector CEOs are paid like bureaucrats with little reward for good performance. However, this ignores the possibility of implicit labor market incentives. The authors show that pay is indeed linked to publicly observable performance measures. Moreover poorly performing principals face a higher chance of being replaced. These findings for the public sector parallel what has been found by looking at the pay and performance of private sector CEOs.