INCENTIVE SYSTEMS AND PRODUCTIVITY

Transcription

1 INCENTIVE SYSTEMS AND PRODUCTIVITY Manuel Bagues Aalto University, August

2 Structure of the talk 1. Introduction 1. Randomized experiments in Economics 2. Examples from the literature 2. Examples from my own work

3 Introduction Some questions in Social Sciences: Would it be profitable for a give firm to allow employees to work from home? (e.g. Yahoo 2013) Do economic rewards increase blood donations? (e.g. World Health Organization policy) How large is electoral fraud in Russia? (e.g elections) Will gender quotas in scientific committees break the glass-ceiling? (e.g. Finland 1995, Spain 2007) Are employees more satisfied if they are informed about the salaries of their colleagues? (e.g. Carlos III University 2011) What about students? Is it a good idea to provide students feedback about their performance relative to their classmates?

4 Theory is often ambiguous The fundamental problem of causal inference We cannot simultaneously observe an individual under treatment and under control Solution? Observational evidence (identification based on observables) E.g. Blood donations

5 Correlation does not imply causation Countries that eat more chocolate receive more Nobel prizes (Messerli 2012)

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7 Correlation does not imply causation Countries that eat more chocolate receive more Nobel prizes Messerli 2012 Will austerity solve the economic crisis? Countries with higher public debt tend to grow less Reinhart and Rogoff 2010, Herdon et al. 2013

8 Figure 4: Real GDP growth vs. public debt/ GDP, country-years, (close-up) Public Debt/GDP Ratio Real GDP Growth Notes. Figure4 isa close-up on a region of Figure3. Real GDP growth isplotted against debt/ GDP for all country-years. Thelocally smoothed regression function isestimated with thegeneral additive

9 Alternative empirical strategies? Sometimes we can use Randomized Controlled Trials Random assignment of individuals to the treatment and the control group Lab experiments Field experiments

10 Some examples Should firms disclose information on peers salaries? Card et al Should we use economic incentives to increase blood donation? Lacetera et al Does working from home work? Bloom et al How large is electoral fraud in Russia? Enikolopov et al Will gender quotas in scientific committees break the glass-ceiling? Bagues and Zinovyeva 2014

11 Should students receive feedback on their relative performance? Motivation: Carlos III University in Madrid wanted to improve the performance of students A potential unexpensive way to improve performance? Provide feedback on relative performance! Theory: Students might become more motivated (tournament) Empirical evidence: Evidence from the lab: Azmat and Iriberri 2012 Evidence from a case study: Azmat and Iriberri 2010

12 Potential caveats External validity? Exerting effort in the real life might be different from a 30 min lab experiment More controlled environment than in the case study Do all students benefit from the treatment? Weaker students might get discourage The policy maker might be concerned not only with academic performance. What about students satisfaction? Do students prior beliefs matter? Field experiment Azmat, Bagues, Cabrales and Iriberri 2014

13 Students at Carlos III University receive only information on their own performance. 17 groups (1,000 students) belonging to the 2009 cohort were randomly assigned to treatment and control groups. Students are assigned to each group by alphabetical order Treatment group was given access to information on their relative performance. This information was updated every six months. Treatment started to be implemented at the beginning of their second year (November 2010). It concluded in September 2013, at time of graduation.

14 Questions: 1. How well informed were students before the treatment? 2. Does the information provided actually affect what students know? 3. Academic outcomes 4. Satisfaction

15 How well informed were students before the treatment? Information from survey conducted in 2010

16 Does the information provided actually affect what students know? (i) Information from survey conducted in 2013 treatment group

17 Does the information provided actually affect what students know? (ii) Information from survey conducted in 2013 control group

18 Academic outcomes May 2010 June 2010 Jan 2011 May 2011 June 2011 Jan 2012 May 2012 June 2012 Jan 2013 May 2013 June

19 Other results There is a significant increase in students satisfaction. We observe no significant impact on perceived easiness of courses No effect either on the choice of elective courses.

20 Conclusion The impact of feedback on relative performance may depend crucially on subjects prior information When candidates underestimate their relative performance, providing feedback may have a negative effect on performance (but positive on satisfaction) It might be wise to test policies before implementing them Carlos III University will only provide feedback on relative performance upon students graduation

21 Thank you! Contact details: