In September 2014, the American Economic Review published two papers by Chetty, Friedman, and Rockoff that used econometrics to answer this question. The AER is the number one ranked journal in all of economics, and the fact that they published two articles by the same authors on the same topic shows how important this work is.

**Three Steps in an Econometric Study**

**Step 1: What Do You Want To Do?**

It's all in the question at the top of this page: Do good teachers produce better student outcomes? Answering this question requires defining what it means for a teacher to be "good" and what it means for students to have "better" outcomes. That brings us to step 2.

**Step 2: ****Formulate Your Research Design and Specify the Econometric Model**

Who is a good teacher? We can’t just measure test scores because some teachers may get high test scores because they are easy graders or because they tend to have smarter students in their class. The authors used econometrics to measure how much each teacher raised test scores from the previous year. With this “value added” measure of teacher quality, the authors can estimate using an econometric model whether students who took classes from high value-added teachers earn more later in life.

**Step 3: Apply Statistical Theory**

You'll learn how to do that in this class.

**Findings**

Replacing an average teacher with a teacher in top 5% would increase students’ earnings later in life by 2.8%, as shown in the graph.

The average 12 year old in the United States can expect lifetime earnings of $522,000, so a 2.8% earnings bump is worth about $14,500 per student.

Multiply that by 20 students per classroom and an excellent teacher is really valuable.

Click here for more details on the study.