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Social Incentives in the Workplace

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Author Info
Bandiera, Oriana () (London School of Economics)
Barankay, Iwan () (University of Pennsylvania)
Rasul, Imran () (University College London)

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Abstract

We present evidence on social incentives in the workplace, namely on whether workers’ behavior is affected by the presence of those they are socially tied to, even in settings where there are no externalities among workers due to either the production technology or the compensation scheme in place. To do so we combine data on individual worker productivity from a firm’s personnel records with information on each worker’s social network of friends in the firm. We find that compared to when she has no social ties with her co-workers, a given worker’s productivity is significantly higher when she works alongside friends who are more able than her, and significantly lower when she works with friends who are less able than her. As workers are paid piece rates based on individual productivity, social incentives can be quantified in monetary terms and are such that (i) workers who are more able than their friends are willing to exert less effort and forgo 10% of their earnings; (ii) workers who have at least one friend who is more able than themselves are willing to increase their effort and hence productivity by 10%. The distribution of worker ability is such that the net effect of social incentives on the firm’s aggregate performance is positive. The results suggest that firms can exploit social incentives as an alternative to monetary incentives to motivate workers.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4190.

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Length: 53 pages
Date of creation: May 2009
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Publication status: forthcoming in: Review of Economic Studies
Handle: RePEc:iza:izadps:dp4190

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Related research
Keywords: conformism; social incentives; social networks;

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Find related papers by JEL classification:
L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
M5 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kato, Takao & Shu, Pian, 2008. "Performance Spillovers and Social Network in the Workplace: Evidence from Rural and Urban Weavers in a Chinese Textile Firm," IZA Discussion Papers 3340, Institute for the Study of Labor (IZA). [Downloadable!]
  2. Fabian Waldinger, 2009. "Peer Effects in Science - Evidence from the Dismissal of Scientists in Nazi Germany," CEP Discussion Papers dp0910, Centre for Economic Performance, LSE. [Downloadable!]
  3. Jonathan Guryan & Kory Kroft & Matt Notowidigdo, 2007. "Peer Effects in the Workplace: Evidence from Random Groupings in Professional Golf Tournaments," NBER Working Papers 13422, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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