Working Paper: NBER ID: w15623
Authors: Tanjim Hossain; John A. List
Abstract: Recent discoveries in behavioral economics have led to important new insights concerning what can happen in markets. Such gains in knowledge have come primarily via laboratory experiments--a missing piece of the puzzle in many cases is parallel evidence drawn from naturally-occurring field counterparts. We provide a small movement in this direction by taking advantage of a unique opportunity to work with a Chinese high-tech manufacturing facility. Our study revolves around using insights gained from one of the most influential lines of behavioral research--framing manipulations--in an attempt to increase worker productivity in the facility. Using a natural field experiment, we report several insights. For example, conditional incentives framed as both "losses" and "gains" increase productivity for both individuals and teams. In addition, teams more acutely respond to bonuses posed as losses than as comparable bonuses posed as gains. The magnitude of the effect is roughly 1%: that is, total team productivity is enhanced by 1% purely due to the framing manipulation. Importantly, we find that neither the framing nor the incentive effect lose their importance over time; rather the effects are observed over the entire sample period. Moreover, we learn that worker reputation and conditionality of the bonus contract are substitutes for sustenance of incentive effects in the long-run production function.
Keywords: behavioral economics; framing manipulations; productivity; natural field experiment; loss aversion
JEL Codes: C91; C93; D03; D21; J3; J33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reputation of workers (J28) | incentive effects (M52) |
| conditionality of bonus contracts (J33) | incentive effects (M52) |
| framing manipulations (E71) | productivity (O49) |
| framing manipulations (losses) (G41) | productivity (O49) |
| framing manipulations (gains) (E71) | productivity (O49) |
| framing manipulations (E71) | group productivity (O47) |
| framing manipulations (E71) | individual productivity (O49) |