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

Author

Listed:
  • Erika Deserranno

    (Bocconi University)

  • Gianmarco León-Ciliotta

    (U. Pompeu Fabra & BSE)

  • Firman Witoelar

    (Australian National University)

Abstract

We study the effect of raising the level and 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 and usage, but only when the incentives are unknown to prospective clients. When disclosed, higher incentives have no effect on take-up and usage, despite greater agent effort. This is due to the financial incentives sending a negative signal to potential clients about the reliability and trustworthiness of the product. Hence, when designing incentives, organizations should consider both their level and transparency.

Suggested Citation

  • Erika Deserranno & Gianmarco León-Ciliotta & Firman Witoelar, 2025. "When Transparency Fails: Financial Incentives for Local Banking Agents in Indonesia," The Review of Economics and Statistics, MIT Press, vol. 107(6), pages 1537-1552, November.
    • Handle: RePEc:tpr:restat:v:107:y:2025:i:6:p:1537-1552
    DOI: 10.1162/rest_a_01359
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    Cited by:

    1. is not listed on IDEAS
    2. Buvinic, Mayra & Knowles, James C. & Witoelar, Firman, 2022. "The unfolding of women’s economic empowerment outcomes: Time path of impacts in an Indonesia trial," World Development, Elsevier, vol. 158(C).
    3. Rao, Manaswini & Shenoy, Ashish, 2023. "Got (clean) milk? Organization, incentives, and management in Indian dairy cooperatives," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 708-722.
    4. Olabisi, Michael & Maredia, Mywish & Liu, Jiawen & Ajibade, Toyin & Ajeigbe, Hakeem, 2024. "In-group competition for incentives," Journal of Development Economics, Elsevier, vol. 171(C).

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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