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Financial incentives and educational investment: the impact of performance-based scholarships on student time use

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  • Lisa Barrow
  • Cecilia Elena Rouse

Abstract

Using survey data from a field experiment in the U.S., we test whether and how financial incentives change student behavior. We find that providing post-secondary scholarships with incentives to meet performance, enrollment, and/or attendance benchmarks induced students to devote more time to educational activities and to increase the quality of effort toward, and engagement with, their studies; students also allocated less time to other activities such as work and leisure. While the incentives did not generate impacts after eligibility had ended, they also did not decrease students? inherent interest or enjoyment in learning. Finally, we present evidence suggesting that students were motivated more by the incentives provided than simply the effect of giving additional money, and that students who were arguably less time-constrained were more responsive to the incentives as were those who were plausibly more myopic. Overall these results indicate that well-designed incentives can induce post-secondary students to increase investments in educational attainment.

Suggested Citation

  • Lisa Barrow & Cecilia Elena Rouse, 2013. "Financial incentives and educational investment: the impact of performance-based scholarships on student time use," Working Paper Series WP-2013-07, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhwp:wp-2013-07
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    References listed on IDEAS

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    Cited by:

    1. Chevalier, Arnaud & Dolton, Peter & Lührmann, Melanie, 2014. ""Making It Count": Evidence from a Field Study on Assessment Rules, Study Incentives and Student Performance," IZA Discussion Papers 8582, Institute of Labor Economics (IZA).
    2. Bach, Maximilian & Fischer, Mira, 2020. "Understanding the Response to High-Stakes Incentives in Primary Education," Rationality and Competition Discussion Paper Series 261, CRC TRR 190 Rationality and Competition.
    3. Lisa Barrow & Cecilia Elena Rouse & Amanda McFarland, 2020. "Who Has the Time? Community College Students’ Time-Use Response to Financial Incentives," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 48(1), pages 35-52, March.
    4. Burgess, Simon & Metcalfe, Robert & Sadoff, Sally, 2021. "Understanding the response to financial and non-financial incentives in education: Field experimental evidence using high-stakes assessments," Economics of Education Review, Elsevier, vol. 85(C).
    5. Lisa Barrow & Amanda McFarland & Cecilia Elena Rouse, 2020. "Who Has the Time? Community College Students’ Time-Use Response to Financial Incentives," Working Paper Series WP-2020-03, Federal Reserve Bank of Chicago.
    6. Varughese, Aswathy Rachel & Bairagya, Indrajit, 2021. "Interstate variation in household spending on education in India: Does it influence educational status?," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 405-415.
    7. Noemí Herranz-Zarzoso & Gerardo Sabater-Grande, 2016. "Financial incentives and academic performance: An experimental study," Working Papers 2016/18, Economics Department, Universitat Jaume I, Castellón (Spain).
    8. Burgess, Simon, 2016. "Human Capital and Education: The State of the Art in the Economics of Education," IZA Discussion Papers 9885, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Education;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • I2 - Health, Education, and Welfare - - Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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