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Which incentives work? An experimental analysis of incentives for trainers

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  • Omar Azfar
  • Clifford Zinnes

Abstract

One conjecture in the theory of incentives is that incentives based on broader outcomes may be better at motivating agents than incentives based on narrow measures. We designed an experiment to test these hypotheses using a "prospective randomized evaluation procedure" (PREP). We then apply PREP to training programs as typically funded by donors of economic development assistance. We randomly assigned 274 participating entrepreneurs in the Philippines to one of 26, simultaneous, one-day, training classes in marketing. Trainers were given cash incentives based on the average score of their "students" on a standardized test containing an alternative number of questions, which were randomly assigned to each class. We then examined outcomes based on student satisfaction ratings of the trainer. Our results suggest that incentives based on broad outcomes are more effective than incentives based on narrow outcomes. We conclude with ways to improve our approach as well as with a discussion of the implications for using prospective randomized evaluation for improving the evaluation of donor projects.

Suggested Citation

  • Omar Azfar & Clifford Zinnes, 2006. "Which incentives work? An experimental analysis of incentives for trainers," Natural Field Experiments 00209, The Field Experiments Website.
  • Handle: RePEc:feb:natura:00209
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    References listed on IDEAS

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    1. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    2. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    3. Edward Miguel & Michael Kremer, 2001. "Worms: Education and Health Externalities in Kenya," NBER Working Papers 8481, National Bureau of Economic Research, Inc.
    4. Edward L. Glaeser & David I. Laibson & José A. Scheinkman & Christine L. Soutter, 2000. "Measuring Trust," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 811-846.
      • Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
    5. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, January.
    6. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    7. Michael Kremer, 2003. "Randomized Evaluations of Educational Programs in Developing Countries: Some Lessons," American Economic Review, American Economic Association, vol. 93(2), pages 102-106, May.
    8. Richard H. Thaler, 2000. "From Homo Economicus to Homo Sapiens," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 133-141, Winter.
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    Cited by:

    1. Levitt, Steven D. & List, John A., 2009. "Field experiments in economics: The past, the present, and the future," European Economic Review, Elsevier, vol. 53(1), pages 1-18, January.

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