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Social Preferences and the Response to Incentives: Evidence from Personnel Data

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  • Oriana Bandiera
  • Iwan Barankay
  • Imran Rasul

Abstract

We present evidence on whether workers have social preferences by comparing workers' productivity under relative incentives, where individual effort imposes a negative externality on others, with their productivity under piece rates, where it does not. We find that the productivity of the average worker is at least 50 percent higher under piece rates than under relative incentives. We show that this is due to workers partially internalizing the negative externality their effort imposes on others under relative incentives, especially when working alongside their friends. Under piece rates, the relationship among workers does not affect productivity. Further analysis reveals that workers internalize the externality only when they can monitor others and be monitored. This rules out pure altruism as the underlying motive of workers' behavior.

Suggested Citation

  • Oriana Bandiera & Iwan Barankay & Imran Rasul, 2005. "Social Preferences and the Response to Incentives: Evidence from Personnel Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 917-962.
    • Handle: RePEc:oup:qjecon:v:120:y:2005:i:3:p:917-962.
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    File URL: http://hdl.handle.net/10.1093/qje/120.3.917
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