Book excerpt: Incentives to Improve Education identifies three categories of incentives: rewards, (financial rewards for teachers), competition (educational choice, often in the form of payment for education by voucher) and threats (introduction of external standards and accountability for performance). Using new institutional economics as a basis, Robert McMeekin develops a theoretical framework in which micro-level institutions - the 'rules of the game' - within school organizations influence the effort and the performance of teachers, students and other members of school communities. This model is used to analyze alternative approaches within each category of incentives (for example, merit pay for individual teachers versus merit awards to whole schools) and the reasons why some are more effective than others. The book argues that an incentive's impact on schools depends on how it influences the institutional climate within the school. Contracting in schools and networks of schools are also explored. Drawing on a body of economic thought - rarely applied in education studies - that explains how and why different approaches to providing incentives work, this book will be invaluable to economists, practitioners and others with an interest in educational policy and governance and in improving school performance.