When Transparency Fails: Financial Incentives for Local Banking Agents in Indonesia

Abstract : We study the effect of raising the level and the transparency of financial incentives offered to local agents for acquiring clients of a new banking product on take-up. We find that paying agents higher incentives increases take-up, but only when the incentives are unknown to prospective clients. When disclosed, higher incentives instead have no effect on take-up, despite greater agent effort. This is explained by the financial incentives conveying a negative signal about the reliability and trustworthiness of the product and its providers to potential clients. In contexts with limited information about a new technology, financial incentives can thus affect technology adoption through both a supply-side effect (more agent effort) as well as a demand-side signaling effect (change in demand perceptions). Organizations designing incentive schemes should therefore pay close attention to both the level and the transparency of such incentives.

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Caring or Pretending to Care? Social Impact, Firms' Objectives and Welfare

Abstract : Many firms claim that "social impact" influences their strategies. I develop a structural model that quantifies social impact as the sum of the surpluses to a firm and its stakeholders. Using data from a for-profit firm whose prosocial expenditures are measurable and salient to consumers, I find that the firm spends prosocially beyond profit-maximization, which substantially increases welfare. Incentivizing a standard profit-maximizing firm to behave similarly would require subsidies for 55% of the prosocial expenditures because consumers' willingness-to-pay is relatively inelastic to prosocial expenses. Therefore, social impact resembles a self-imposed welfare-enhancing tax with limited pass-through.

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Mission Motivation and Public Sector Performance: Experimental Evidence from Pakistan

Abstract : This paper studies whether public sector organizations can strengthen the mission motivation of their workers and get them to exert effort on the job. I implement a field experiment in partnership with the Department of Health in Pakistan, where I randomly emphasize the public health mission to community health workers, provide performance-linked financial incentives, or do both. The mission treatment improves worker performance across incentivized (home visits) and non-incentivized tasks, while financial incentives improve performance only on the incentivized task. Financial incentives also become less effective at increasing home visits when combined with the mission treatment. Finally, the mission treatment improves downstream child health outcomes---there is a lower prevalence of diarrhea and higher vaccination rates. These results highlight that promoting an organization's mission can be a powerful motivator for public workers, especially in weakly institutionalized environments.

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