Non-Financial Incentives

Brandon Williams

Development Economics

October 1, 2024

Non-Financial Incentives

Development Economics

October 1, 2024

Making Moves Matter (2019)

  • Not all incentives are financial, and in governments, there may be limited finances available
  • Another way to incentivize performance is through strategic transfers to good posts for bureaucrats
  • Randomize tax collectors in Pakistan
    • Performance ranked serial dictatorship (PRSD)
    • Control
  • 41% (year 1) and 30% (year 2) increase in tax revenues, nearly equivalent to a direct financial incentive design, but at no cost to the government
  • Model predicts some have stronger incentives, and indeed they do
  • Diminishing results over time? May be that some learn how the system works and can reduce their effort

Non-Financial Incentives

Development Economics

October 1, 2024

Making Moves Matter (2019)

The Model:

y_i = y_{i0} + e_i + \epsilon_i

}

}

}

effort

growth of tax with no effort

tax growth

Outcome:

Non-Financial Incentives

Development Economics

October 1, 2024

Making Moves Matter (2019)

The Model:

y_i = y_{i0} + e_i + \epsilon_i

Outcome:

\max_{e_i} \sum^J_{j=1} \underbrace{u_{ij} \Pr} ( j = r_i(y_i, \mathbf{y}_{-i}, \mathbf{P}))-c(e_i)

Inspector choice:

Utility

Assignment function

Preferences

}

Non-Financial Incentives

Development Economics

October 1, 2024

Making Moves Matter (2019)

The Model:

y_i = y_{i0} + e_i + \epsilon_i

Outcome:

\max_{e_i} \sum^J_{j=1} u_{ij} \Pr ( j = r_i(y_i, \mathbf{y}_{-i}, \mathbf{P}))-c(e_i)

Inspector choice:

FOC and equil.:

\underbrace{\frac{d E[u]}{de_i}} = \sum^J_{j=1} u_{ij} \frac{ \partial \Pr ( j = r_i(y_i, \mathbf{y}_{-i}, \mathbf{P}))}{\partial y_i} = c'(e_i)

Marginal return to effort

Non-Financial Incentives

Development Economics

October 1, 2024

Making Moves Matter (2019)

The Model:

\frac{d E[u]}{de_i} = \sum^J_{j=1} u_{ij} \frac{ \partial \Pr ( j = r_i(y_i, \mathbf{y}_{-i}, \mathbf{P}))}{\partial y_i} = c'(e_i)

Everyone knows everything,

creates substantial heterogeneity

Less knowledge

moves it right

Non-Financial Incentives

Development Economics

October 1, 2024

Making Moves Matter (2019)

The Model:

\frac{d E[u]}{de_i} = \sum^J_{j=1} u_{ij} \frac{ \partial \Pr ( j = r_i(y_i, \mathbf{y}_{-i}, \mathbf{P}))}{\partial y_i} = c'(e_i)

Everyone knows everything,

creates substantial heterogeneity

Less knowledge

moves it right

 

Everyone fighting for the same slot

Some people know exactly

where they can end up

Non-Financial Incentives

Development Economics

October 1, 2024

Making Moves Matter (2019)

The Model:

\frac{d E[u]}{de_i} = \sum^J_{j=1} u_{ij} \frac{ \partial \Pr ( j = r_i(y_i, \mathbf{y}_{-i}, \mathbf{P}))}{\partial y_i} = c'(e_i)

 

Everyone fighting for the same slot

AND no one knows if they have

enough to get there

Reduced effort as some outcomes

will not depend on their performance

Non-Financial Incentives

Development Economics

October 1, 2024

Making Moves Matter (2019)

Interact Prediction with Treatment to see Heterogeneity:

Non-Financial Incentives

Development Economics

October 1, 2024

Making Moves Matter (2019)

Interact Prediction with Treatment to see Heterogeneity:

Good assumption:

Assuming all the same seems not so good

- they know other's output "business-as-usual"

 

- they know little about their preferences

 

Non-Financial Incentives

Development Economics

Awards Unbundled (2014)

  • What are the mechanisms that can drive the effectiveness of non-monetary incentives?
  • Training for health workers in Zambia:
    • Control
    • Information
      • T1: "Private Social Comparison" - rank information
      • T2: "Public Social Comparison" - rank plus names of top 4 performers
    • Awards
      • T3: "Employer Recognition" - Top 4 get a letter from Ministry of Health
      • T4: "Social Visibility" - One of the top 4 gets interview and photo in newsletter
  • See result on test scores

October 1, 2024

Non-Financial Incentives

Development Economics

Awards Unbundled (2014)

  • Training for health workers in Zambia:
    • Control
    • Information
      • T1: "Private Social Comparison" - rank information
      • T2: "Public Social Comparison" - rank plus names of top 4 performers
    • Awards
      • T3: "Employer Recognition" - Top 4 get a letter from Ministry of Health
      • T4: "Social Visibility" - One of the top 4 gets interview and photo in newsletter

October 1, 2024

Non-Financial Incentives

Development Economics

Awards Unbundled (2014)

  • Training for health workers in Zambia:
    • Control
    • Information - consistent with information avoidance
      • T1: "Private Social Comparison" - rank information
      • T2: "Public Social Comparison" - rank plus names of top 4 performers
    • Awards
      • T3: "Employer Recognition" - Top 4 get a letter from Ministry of Health
      • T4: "Social Visibility" - One of the top 4 gets interview and photo in newsletter

October 1, 2024

Non-Financial Incentives

Development Economics

Awards Unbundled (2014)

  • Training for health workers in Zambia:
    • Control
    • Information - consistent with information avoidance
      • T1: "Private Social Comparison" - rank information - much worse (-.31 sd)
      • T2: "Public Social Comparison" - rank plus names of top 4 performers
    • Awards
      • T3: "Employer Recognition" - Top 4 get a letter from Ministry of Health
      • T4: "Social Visibility" - One of the top 4 gets interview and photo in newsletter
  •  

October 1, 2024

Non-Financial Incentives

Development Economics

Awards Unbundled (2014)

  • Training for health workers in Zambia:
    • Control
    • Information - consistent with information avoidance
      • T1: "Private Social Comparison" - rank information - much worse (-.31 sd)
      • T2: "Public Social Comparison" - rank plus names of top 4 performers - much worse (-.38 sd)
    • Awards
      • T3: "Employer Recognition" - Top 4 get a letter from Ministry of Health
      • T4: "Social Visibility" - One of the top 4 gets interview and photo in newsletter

October 1, 2024

Non-Financial Incentives

Development Economics

Awards Unbundled (2014)

  • Training for health workers in Zambia:
    • Control
    • Information - consistent with information avoidance
      • T1: "Private Social Comparison" - rank information - much worse (-.31 sd)
      • T2: "Public Social Comparison" - rank plus names of top 4 performers - much worse (-.38 sd)
    • Awards
      • T3: "Employer Recognition" - Top 4 get a letter from Ministry of Health - much better (+.38 sd)
      • T4: "Social Visibility" - One of the top 4 gets interview and photo in newsletter

October 1, 2024

Non-Financial Incentives

Development Economics

Awards Unbundled (2014)

  • Training for health workers in Zambia:
    • Control
    • Information - consistent with information avoidance
      • T1: "Private Social Comparison" - rank information - much worse (-.31 sd)
      • T2: "Public Social Comparison" - rank plus names of top 4 performers - much worse (-.38 sd)
    • Awards
      • T3: "Employer Recognition" - Top 4 get a letter from Ministry of Health - much better (+.38 sd)
      • T4: "Social Visibility" - One of the top 4 gets interview and photo in newsletter - much better (+.44 sd)

October 1, 2024

Non-Financial Incentives

Development Economics

Awards Unbundled (2014)

  • Training for health workers in Zambia:
    • Control
    • Information - consistent with information avoidance
      • T1: "Private Social Comparison" - rank information - much worse (-.31 sd)
      • T2: "Public Social Comparison" - rank plus names of top 4 performers - much worse (-.38 sd)
    • Awards
      • T3: "Employer Recognition" - Top 4 get a letter from Ministry of Health - much better (+.38 sd)
      • T4: "Social Visibility" - One of the top 4 gets interview and photo in newsletter - much better (+.44 sd)
  • These effects cancel out in initial results but are shown through differences

October 1, 2024

Development Economics

Mission Motivation (R&R AER)

  • One might think that public sector workers are there because of the mission
  • Health workers in Pakistan:
    • Mission-training treatment: watch, discuss and repeatedly engage with the mission
    • Incentives treatment: bonus payments (to get comparison of effect)
    • Both
    • Placebo (focused training) and Control
  • Evidence of crowding out (or crowding in)?

Non-Financial Incentives

October 1, 2024

Development Economics

Mission Motivation (R&R AER)

  • Health workers in Pakistan:
    • Mission-training treatment: watch, discuss and repeatedly engage with the mission
      • 16.1% improvement in household visits
      • Multiple other improvements in quality of services
    • Incentives treatment: bonus payments (to get comparison of effect)
      • 27.3% improvement in household visits
      • No improvements in other areas
    • Both
      • Little evidence of crowding out, but financial incentives lose effectiveness
    • Placebo (focused training) and Control

Non-Financial Incentives

October 1, 2024

Development Economics

Mission Motivation (R&R AER)

  • Does that mean there are real effects to mission / incentives => more household visits?

It would

seem yes

Non-Financial Incentives

October 1, 2024

Development Economics

Mission Motivation (R&R AER)

  • Does that mean there are real effects to mission / incentives => more household visits?

What is

happening

here?

Does it convince you it is, in fact, the mission?

Non-Financial Incentives

October 1, 2024