Do Financial Incentives Crowd Out Intrinsic Motivation to Perform on Standardized Tests?

In the face of worryingly low performance on standardized test, offering students financial incentives linked to academic performance has been proposed as a potentially cost-effective way to support improvement. However, a large literature across disciplines finds that extrinsic incentives, once removed, may crowd out intrinsic motivation on subsequent, similar tasks. We conduct a field experiment where students, parents, and tutors are offered incentives designed to encourage student preparation for a high-stakes state test. The incentives reward performance on a separate low-stakes assessment designed to measure the same skills as the high-stakes test. Performance on the high-stakes test, however, is not incentivized. We find substantial treatment effects on the incented tests but no effect on the non-incented test; if anything, the incentives result in worse performance on the non-incented test. We also find evidence supporting the conclusion that the incentives crowd out intrinsic motivation to perform well on the non-incented test, but this effect is only temporary. One year later, students who had been in the incentives treatments perform better than those in the control on the same non-incented test.