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Recent research adds a new insight on merit pay. Researchers conducted an experiment in Chicago Heights, Ill., a community 30 miles south of Chicago, in which teachers were given $4,000 upfront to produce rapid gains in student math scores. If they failed, the money would be taken away. The idea differs from using merit pay to reward success.

The result? Students had nearly a 10 percentile increase in scores. Teachers seemed to have had a big emotional stake in keeping the money rather than relying on an illusive promise of earning money from succeeding.
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