Merit pay proponents argue that monetary incentives for better teaching can improve the quality of instruction in the nation's classrooms. Yet only a handful of studies have evaluated the impact of teacher merit pay on student achievement. These studies offer no conclusive recommendations regarding the optimal role of merit pay in U.S. school systems, leaving policymakers largely dependent on studies on other countries for information about how best to implement merit pay programs. Recently, the New York City Department of Education (DOE) conducted a policy experiment to test whether merit pay given to all teachers at an effective school could increase student achievement. The city's School-Wide Performance Bonus Program, launched in 2007 and endorsed by both the DOE and the teachers union, was implemented in a randomly selected subset of the city's most disadvantaged schools. The randomized design of school selection makes it possible to separate out the causal effect of this form of merit pay from myriad other influences on student learning. The authors' analysis is based on data from the first two years of the bonus program. The authors discuss their findings and describe the key features of the program's structure. They find very little effect overall, positive or negative. There is some evidence, however, that the program had a positive impact in schools where teachers were few in number, an environment in which it may be easier for teachers to cooperate in pursuit of a common reward. This study leaves open the question of whether a bonus program that rewards teachers for their own specific effectiveness would be more successful. (Contains 1 figure.)