Does Merit Pay Work (Redux)?

Yet another study, this one from Vanderbilt University’s National Center on Performance Incentives (boy that’s specific) in the Times.
The study released Tuesday by Vanderbilt University’s National Center on Performance Incentives researchers found that students in classrooms where teachers received bonuses saw the same gains as the classes where educators got no incentive.
“I think most people agree today that the current way in which we compensate teachers is broken,” said Matthew Springer, executive director of the Vanderbilt center and lead researcher on the study. “But we don’t know what the better way is yet.
They state that 5-8th grade teachers in Nashville public schools over 3 years from 2007-2009 could make between $5k-$15K annually, depending on how their students tested.
A bit issue here as in a study in Florida is that you are talking about individual bonuses which tend to pit teachers against each other. Maybe merit pay would be better for team-based teaching or school-wide merit pay. Does merit pay make a mediocre teacher try harder? Can money alone do that or would a school/district need to add more professional development to kick it up?