Outcomes: The importance of alternative labor market opportunities and non-pecuniary variation

Researchers using cross-sectional data have failed to produce systematic ev idence that teacher salaries affect student outcomes. These studies general ly do not account for non-pecuniary job attributes and alternative wage opp ortunities, which affect the opportunity cost of choosing to teach. When we employ the methodology used in previous studies, we replicate their result s. However, once we adjust for labor market factors, we estimate that raisi ng teacher wages by 10% reduces high school dropout rates by 3% to 4%. Our findings suggest that previous studies have failed to produce robust estima tes because they lack adequate controls for non-wage aspects of teaching an d market differences in alternative occupational opportunities.