Dana Goldstein is against it:

Forty years of psychological research demonstrates that when someone is faced with a complex, creative task like teaching money is an ineffective motivational tool, and may even delay progress.

Yglesias counters:

I don’t think the idea is that ineffective teachers are going to suddenly will themselves into becoming great teachers in order to grab some incentive pay. The point is that if you’re employing a bunch of teachers, any of whom might depart in favor of employment elsewhere, you want to make sure that it’s your most effective teachers who are least likely to quit. And one way to do that is to make sure that it’s your most effective teachersrather than simply your longest-serving oneswho are getting paid the most money.