Teacher heterogeneity , value added and education policy ∗

This study examines the theoretical and practical implications of ranking teachers with a one-dimensional metric when teacher effectiveness varies across subjects or student types. We document the empirical failure of standard value-added assumptions of teacher input homogeneity, but demonstrate that previously suggested teacher firing policies still improve student welfare, although they result in many incorrect firing decisions. We further show that teacher heterogeneity can be used to improve student test scores by matching teachers to students or subjects according to their comparative advantage. These matching gains exceed those of the firing policy. ∗We thank Bentley MacLeod and Brian Jacob and seminar participants at Brigham Young University and the University of Michigan for helpful feedback. †136 Faculty Office Building, Provo, UT 84602. Email: [email protected]. ‡182 Faculty Office Building, Provo, UT 84602. Email: [email protected]. §164 Faculty Office Building, Provo, UT 84602. Email: [email protected].