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The Effect of Financial Rewards on Students' Achievement: Evidence from a Randomized Experiment

  • Edwin Leuven
  • Hessel Oosterbeek
  • Bas van der Klaauw

This paper reports on a randomized field experiment in which first-year university students could earn financial rewards for passing all first-year requirements within one year. Financial incentives turn out to have positive effects on achievement of high-ability students, whereas they have a negative impact on achievement of low-ability students. After three years these effects have increased, suggesting dynamic spillovers. The negative effects for less-able students are consistent with results from psychology and behavioral economics showing that external rewards may be detrimental for intrinsic motivation. (JEL: I21, I22, J24) (c) 2010 by the European Economic Association.

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Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 8 (2010)
Issue (Month): 6 (December)
Pages: 1243-1265

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Handle: RePEc:tpr:jeurec:v:8:y:2010:i:6:p:1243-1265
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  1. Angrist, Joshua & Lavy, Victor, 2002. "The Effect of High School Matriculation Awards: Evidence from Randomized Trials," CEPR Discussion Papers 3827, C.E.P.R. Discussion Papers.
  2. Erica Field, 2006. "Educational Debt Burden and Career Choice: Evidence from a Financial Aid Experiment at NYU Law School," NBER Working Papers 12282, National Bureau of Economic Research, Inc.
  3. James J. Heckman & Lance Lochner & Christopher Taber, 1999. "General Equilibrium Cost Benefit Analysis of Education and Tax Policies," NBER Working Papers 6881, National Bureau of Economic Research, Inc.
  4. Kremer, Michael Robert & Miguel, Edward A. & Thorton, Rebecca L, 2004. "Incentives to Learn," Center for International and Development Economics Research, Working Paper Series qt9kc4p47q, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  5. Joshua Angrist & Eric Bettinger & Erik Bloom & Elizabeth King & Michael Kremer, 2001. "Vouchers for Private Schooling in Colombia: Evidence from a Randomized Natural Experiment," NBER Working Papers 8343, National Bureau of Economic Research, Inc.
  6. Tomas J. Philipson, 2000. "External Treatment Effects and Program Implementation Bias," NBER Technical Working Papers 0250, National Bureau of Economic Research, Inc.
  7. Edward Miguel & Michael Kremer & Rebecca Thornton, 2004. "Incentives to learn," Natural Field Experiments 00289, The Field Experiments Website.
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