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


  • Lisa Barrow
  • Cecilia Elena Rouse


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

    1. Philip Oreopoulos & Daniel Lang & Joshua Angrist, 2009. "Incentives and Services for College Achievement: Evidence from a Randomized Trial," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 136-163, January.
    2. Joshua Angrist & Victor Lavy, 2009. "The Effects of High Stakes High School Achievement Awards: Evidence from a Randomized Trial," American Economic Review, American Economic Association, vol. 99(4), pages 1384-1414, September.
    3. David Deming & Susan Dynarski, 2009. "Into College, Out of Poverty? Policies to Increase the Postsecondary Attainment of the Poor," NBER Working Papers 15387, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Burgess, Simon & Metcalfe, Robert & Sadoff, Sally, 2016. "Understanding the Response to Financial and Non-Financial Incentives in Education: Field Experimental Evidence Using High-Stakes Assessments," IZA Discussion Papers 10284, Institute for the Study of Labor (IZA).
    2. 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).
    3. Burgess, Simon, 2016. "Human Capital and Education: The State of the Art in the Economics of Education," IZA Discussion Papers 9885, Institute for the Study of Labor (IZA).
    4. 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 for the Study of Labor (IZA).

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    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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