(DP 2026-09) Labor supply responses to teacher incentives: Evidence from the Philippine Special Hardship Allowance

Abstract

Teacher shortages in schools located in geographically isolated and disadvantaged areas (GIDAs) remain a persistent challenge in the Philippines, constraining learning outcomes in underserved communities despite the long-standing provision of the Special Hardship Allowance (SHA). This paper exploits the Department of Education’s adoption of a hardship index-based eligibility criterion in 2021 through a fuzzy regression discontinuity design to examine whether SHA provision affects the net movement of teachers in and out of hardship schools. Pooling 2021 to 2024, schools that are SHA recipients reduced net teacher loss rates by 2.676 percentage points, applying to schools near the cutoff whose SHA receipt changes because of eligibility. A difference-in-differences analysis of newly eligible schools, which relies on a different identifying assumption, points in the same direction. The pooled estimate is stable across a series of robustness checks, including placebo cutoffs, donut hole specifications, and an uncensored outcome measure. The findings of this study suggest that SHA can help staff schools in GIDAs, and that sustained provision grounded in a more accurate and responsive measurement of teacher hardship conditions may be important in addressing teacher shortages in underserved schools.

JEL classification: I28, J38, J45