Working Paper: CEPR ID: DP15714
Authors: Erika Deserranno; Gianmarco Len Ciliotta; Firman Witoelar
Abstract: We study the effect of raising the level and the transparency of financial incentives offered to local agents for acquiring clients of a new banking product on take-up. We find that paying agents higher incentives increases take-up, but only when the incentives are unknown toprospective clients. When disclosed, higher incentives instead have no effect on take-up, despite greater agent effort. This is explained by the financial incentives conveying a negative signal about the reliability and trustworthiness of the product and its providers to potentialclients. In contexts with limited information about a new technology, financial incentives can thus affect technology adoption through both a supply-side effect (more agent effort) as well as a demand-side signaling effect (change in demand perceptions). Organizations designingincentive schemes should therefore pay close attention to both the level and the transparency of such incentives.
Keywords: financial incentives; pay transparency; technology adoption
JEL Codes: J31; D84; M52; O14; G28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| raising the level of financial incentives (J33) | takeup of new banking products (G21) |
| disclosed incentives (public information) (D82) | takeup of new banking products (G21) |
| higher disclosed incentives (M52) | trust in the product and its providers (L15) |
| increased agent effort (L85) | takeup of new banking products (G21) |
| financial incentives (M52) | technology adoption (O33) |
| signals conveyed by agents' incentives (D82) | demand perceptions (D84) |