Working Paper: NBER ID: w17472
Authors: Craig E. Landry; Andreas Lange; John A. List; Michael K. Price; Nicholas G. Rupp
Abstract: Several recent laboratory experiments have shown that the use of explicit incentives--such as conditional rewards and punishment--entail considerable "hidden" costs. The costs are hidden in the sense that they escape our attention if our reasoning is based on the assumption that people are exclusively self-interested. This study represents a first attempt to explore whether, and to what extent, such considerations affect equilibrium outcomes in the field. Using data gathered from nearly 3000 households, we find little support for the negative consequences of control in naturally-occurring labor markets. In fact, even though we find evidence that workers are reciprocal, we find that worker effort is maximized when we use conditional--not unconditional--rewards to incent workers.
Keywords: Behavioral Economics; Incentives; Field Experiment; Labor Markets; Reciprocity
JEL Codes: C93; D03; J3; J33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| unconditional gifts (D64) | worker productivity (J29) |
| unconditional gifts (D64) | total dollars raised (Y10) |
| conditional gifts (D64) | worker productivity (J29) |
| conditional gifts (D64) | total dollars raised (Y10) |
| conditional gifts (D64) | net revenue for the organization (L31) |