Working Paper: NBER ID: w22992
Authors: Philipp Ager; Leonardo Bursztyn; Hansjoachim Voth
Abstract: A growing theoretical and empirical literature shows that public recognition can lead employees to exert greater effort. However, status competition is also associated with excessive expenditure on status goods, greater likelihood of bankruptcy, and more risk taking by money managers. This paper examines the effects of recognition and status competition jointly. In particular, we focus on the spillover effects of public recognition on the performance and risk taking of peers. Using newly collected data on monthly “victory” scores of more than 5,000 German pilots during World War II, we find that status competition had important effects: After the German armed forces bulletin mentioned the accomplishments of a particular fighter pilot, his former peers performed considerably better. This outperformance varied across skill groups. When a former squadron peer was mentioned, the best pilots tried harder, scored more, and died no more frequently; in contrast, average pilots won only a few additional victories but died at a significantly higher rate. Hence our results show that the overall efficiency effect of nonfinancial rewards can be ambiguous in settings where both risk and output affect aggregate performance.
Keywords: Status Competition; Public Recognition; Pilot Performance; World War II
JEL Codes: D03; J20; N14; Z00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Public recognition in Wehrmachtbericht (Y50) | Performance of former peers (C92) |
| Mention in Wehrmachtbericht (Y50) | Performance increase for top 1% pilots (L93) |
| Mention in Wehrmachtbericht (Y50) | Performance increase for average pilots (D29) |
| Performance increase for average pilots (D29) | Higher casualty rate (J17) |
| Public recognition (O36) | Competitive environment (L13) |
| Competitive environment (L13) | Performance (D29) |