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Learning for a bonus: How financial incentives interact with preferences

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  • Uschi Backes-Gellner

    () (Department of Business Administration, University of Zurich)

  • Yvonne Oswald

    () (Department of Business Administration, University of Zurich)

Abstract

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.

Suggested Citation

  • Uschi Backes-Gellner & Yvonne Oswald, 2012. "Learning for a bonus: How financial incentives interact with preferences," Economics of Education Working Paper Series 0079, University of Zurich, Department of Business Administration (IBW).
  • Handle: RePEc:iso:educat:0079
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    Cited by:

    1. Backes-Gellner, Uschi & Herz, Holger & Kosfeld, Michael & Oswald, Yvonne, 2018. "Do Preferences and Biases predict Life Outcomes? Evidence from Education and Labor Market Entry Decisions," CEPR Discussion Papers 12609, C.E.P.R. Discussion Papers.
    2. Peter Hoeschler & Uschi Backes-Gellner, 2017. "The Relative Importance of Personal Characteristics for the Hiring of Young Workers," Economics of Education Working Paper Series 0142, University of Zurich, Department of Business Administration (IBW), revised Jan 2018.
    3. Mohrenweiser, Jens & Zwick, Thomas & Backes-Gellner, Uschi, 2013. "Poaching and firm-sponsored training: First clean evidence," ZEW Discussion Papers 13-037, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Mohrenweiser Jens & Pfeiffer Friedhelm, 2015. "Coaching Disadvantaged Young People: Evidence from Firm Level Data," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 235(4-5), pages 459-473, August.
    5. Rinawi, Miriam & Backes-Gellner, Uschi, 2013. "Should I stay or should I go? - The Effect of Performance Pay on the Retention of Apprenticeship Graduates," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80024, Verein für Socialpolitik / German Economic Association.
    6. Hoeschler, Peter & Balestra, Simone & Backes-Gellner, Uschi, 2018. "The development of non-cognitive skills in adolescence," Economics Letters, Elsevier, vol. 163(C), pages 40-45.
    7. Mohrenweiser, Jens & Wydra-Sommaggio, Gaby & Zwick, Thomas, 2015. "Work-related ability as source of information advantages of training employers," ZEW Discussion Papers 15-057, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    8. Simone Balestra & Beatrix Eugster & Helge Liebert, 2017. "The Effect of School Starting Age on Special Needs Incidence and Child Development into Adolescence," CESifo Working Paper Series 6837, CESifo Group Munich.
    9. Jens Mohrenweiser & Gabriele Wydra-Somaggio & Thomas Zwick, 2017. "Information Advantages of Training Employers Despite Credible Training Certificates," Economics of Education Working Paper Series 0121, University of Zurich, Department of Business Administration (IBW), revised Apr 2017.
    10. repec:eee:poleco:v:51:y:2018:i:c:p:93-106 is not listed on IDEAS

    More about this item

    Keywords

    Student performance; Financial incentive; Time preference; Risk preference;

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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