IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Learning for a bonus: How financial incentives interact with preferences

  • Uschi Backes-Gellner


    (Department of Business Administration, University of Zurich)

  • Yvonne Oswald


    (Department of Business Administration, University of Zurich)

This paper investigates the effect of financial incentives on student performance and analyzes for the first time how the incentive effect in education is moderated by students’ risk and time preferences. To examine this interaction we use a natural experiment that we combine with data from surveys and economic experiments on risk and time preferences. We not only find that students who are offered financial incentives for better grades have on average better first- and second-year grade point averages, but more importantly, we find that highly impatient students respond more strongly to financial incentives than less impatient students. This finding suggests that financial incentives are most effective if they solve educational problems of myopic students.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Economics of Education Working Paper Series with number 0079.

in new window

Length: 30 pages
Date of creation: May 2012
Date of revision:
Handle: RePEc:iso:educat:0079
Contact details of provider: Postal: Plattenstrasse 14, CH-8032 Zürich
Phone: ++41 1 634 29 27
Fax: ++41 1 634 43 48
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Dohmen, Thomas J & Falk, Armin & Huffman, David & Sunde, Uwe, 2008. "Are Risk Aversion and Impatience Related to Cognitive Ability?," CEPR Discussion Papers 6852, C.E.P.R. Discussion Papers.
  2. Michael Kremer & Edward Miguel & Rebecca Thornton, 2009. "Incentives to Learn," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 437-456, August.
  3. Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2001. "Estimating Individual Discount Rates in Denmark: A Field Experiment," NCEE Working Paper Series 200102, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Nov 2001.
  4. Alan S. Blinder & Yoram Weiss, 1975. "Human Capital and Labor Supply: A Synthesis," NBER Working Papers 0067, National Bureau of Economic Research, Inc.
  5. Burks, Stephen V. & Carpenter, Jeffrey P. & Götte, Lorenz & Rustichini, Aldo, 2008. "Cognitive Skills Explain Economic Preferences, Strategic Behavior, and Job Attachment," IZA Discussion Papers 3609, Institute for the Study of Labor (IZA).
  6. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," NBER Working Papers 12006, National Bureau of Economic Research, Inc.
  7. Edwin Leuven & Hessel Oosterbeek & Bas van der Klaauw, 2004. "The e ect of financial rewards on students achievement: Evidence from a randomized experiment," HEW 0410002, EconWPA.
  8. Eric Bettinger & Robert Slonim, 2006. "Patience among children," Artefactual Field Experiments 00043, The Field Experiments Website.
  9. Jere R. Behrman & Jorge Gallardo-García & Susan W. Parker & Petra E. Todd & Viviana Vélez-Grajales, 2012. "Are conditional cash transfers effective in urban areas? Evidence from Mexico," Education Economics, Taylor & Francis Journals, vol. 20(3), pages 233-259, February.
  10. Brunello, Giorgio, 2002. "Absolute risk aversion and the returns to education," Economics of Education Review, Elsevier, vol. 21(6), pages 635-640, December.
  11. Roland G. Fryer, Jr & Richard T. Holden, 2012. "Multitasking, Learning, and Incentives: A Cautionary Tale," NBER Working Papers 17752, National Bureau of Economic Research, Inc.
  12. Juerg Schweri, 2004. "Does it pay to be a good student? Results from the Swiss graduate labour market," Diskussionsschriften dp0405, Universitaet Bern, Departement Volkswirtschaft.
  13. Flavio Cunha & James J. HECKMAN, 2009. "Investing in our Young People," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 117(3), pages 387-418.
  14. Matthew Rabin., 1997. "Psychology and Economics," Economics Working Papers 97-251, University of California at Berkeley.
  15. Gary S. Becker, 1975. "Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education, Second Edition," NBER Books, National Bureau of Economic Research, Inc, number beck75-1, July.
  16. Botond Koszegi & Matthew Rabin, 2005. "A Model of Reference-Dependent Preferences," Levine's Bibliography 784828000000000341, UCLA Department of Economics.
  17. Levhari, David & Weiss, Yoram, 1974. "The Effect of Risk on the Investment in Human Capital," American Economic Review, American Economic Association, vol. 64(6), pages 950-63, December.
  18. Eric P. Bettinger, 2010. "Paying to Learn: The Effect of Financial Incentives on Elementary School Test Scores," NBER Working Papers 16333, National Bureau of Economic Research, Inc.
  19. Chetan Dave & Catherine Eckel & Cathleen Johnson & Christian Rojas, 2010. "Eliciting risk preferences: When is simple better?," Journal of Risk and Uncertainty, Springer, vol. 41(3), pages 219-243, December.
  20. Tom Krebs, 2003. "Human Capital Risk And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 709-744, May.
  21. Roland G. Fryer, 2011. "Financial Incentives and Student Achievement: Evidence from Randomized Trials," The Quarterly Journal of Economics, Oxford University Press, vol. 126(4), pages 1755-1798.
  22. 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.
  23. Uri Gneezy & Stephan Meier & Pedro Rey-Biel, 2011. "When and Why Incentives (Don't) Work to Modify Behavior," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 191-210, Fall.
  24. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  25. Meier, Stephan & Sprenger, Charles, 2010. "Stability of Time Preferences," IZA Discussion Papers 4756, Institute for the Study of Labor (IZA).
  26. 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 136-63, January.
  27. Roland G. Fryer, Jr, 2010. "Financial Incentives and Student Achievement: Evidence from Randomized Trials," NBER Working Papers 15898, National Bureau of Economic Research, Inc.
  28. Baird, Sarah & Mcintosh, Craig & Ozler, Berk, 2010. "Cash or condition ? evidence from a cash transfer experiment," Policy Research Working Paper Series 5259, The World Bank.
  29. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  30. Drazen Prelec & George Loewenstein, 1991. "Decision Making Over Time and Under Uncertainty: A Common Approach," Management Science, INFORMS, vol. 37(7), pages 770-786, July.
  31. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
  32. Leuven, Edwin & Oosterbeek, Hessel & van der Klaauw, Bas, 2003. "The Effect of Financial Rewards on Students' Achievements: Evidence from a Randomized Experiment," CEPR Discussion Papers 3921, C.E.P.R. Discussion Papers.
  33. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Lost In State Space: Are Preferences Stable?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 1091-1112, 08.
  34. Ethel B. Jones & John D. Jackson, 1990. "College Grades and Labor Market Rewards," Journal of Human Resources, University of Wisconsin Press, vol. 25(2), pages 253-266.
  35. Glenn W. Harrison & Eric Johnson & Melayne M. McInnes & E. Elisabet Rutstr�m, 2005. "Risk Aversion and Incentive Effects: Comment," American Economic Review, American Economic Association, vol. 95(3), pages 897-901, June.
  36. Castillo, Marco & Ferraro, Paul J. & Jordan, Jeffrey L. & Petrie, Ragan, 2011. "The today and tomorrow of kids: Time preferences and educational outcomes of children," Journal of Public Economics, Elsevier, vol. 95(11), pages 1377-1385.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:iso:educat:0079. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Eggenberger)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.