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Multitasking, Learning, and Incentives: A Cautionary Tale

  • Roland G. Fryer, Jr
  • Richard T. Holden

We develop a multi-period, multi-task principal-agent model in which neither the principal nor the agent knows the mapping from actions to outputs. The agent can learn about the production function over time by exerting effort and observing output. The model has a stark prediction: incentives may have a negative impact on agent effort if, by exerting effort, they learn their ability is lower than their prior beliefs. To provide evidence on the model's predictions, we conduct a field experiment in fifty Houston public schools, where students, parents, and teachers were rewarded with financial incentives. The experimental data is consistent with the model's most distinguishing predictions, though other explanations are possible.

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File URL: http://www.nber.org/papers/w17752.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17752.

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Date of creation: Jan 2012
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Handle: RePEc:nbr:nberwo:17752
Note: ED LS
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  1. Paarsch, H-J & Shearer, B, 1996. "Piece Rates, Fixed Wages, and Incentive Effects : Statistical Evidence From Payroll Records," Papers 9623, Laval - Recherche en Energie.
  2. repec:feb:natura:0004 is not listed on IDEAS
  3. Barrera-Osorio, Felipe & Bertrand, Marianne & L. Linden, Leigh & Perez-Calle, Francisco, 2008. "Conditional cash transfers in education : design features, peer and sibling effects evidence from a randomized experiment in Colombia," Policy Research Working Paper Series 4580, The World Bank.
  4. Eric P. Bettinger, 2012. "Paying to Learn: The Effect of Financial Incentives on Elementary School Test Scores," The Review of Economics and Statistics, MIT Press, vol. 94(3), pages 686-698, August.
  5. Behrman, Jere R & Sengupta, Piyali & Todd, Petra, 2005. "Progressing through PROGRESA: An Impact Assessment of a School Subsidy Experiment in Rural Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 54(1), pages 237-75, October.
  6. Roland G. Fryer, Jr, 2010. "Financial Incentives and Student Achievement: Evidence from Randomized Trials," NBER Working Papers 15898, National Bureau of Economic Research, Inc.
  7. 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.
  8. Karthik Muralidharan & Venkatesh Sundararaman, 2009. "Teacher Performance Pay: Experimental Evidence from India," NBER Working Papers 15323, National Bureau of Economic Research, Inc.
  9. Joshua Angrist & Daniel Lang & Philip Oreopoulos, 2006. "Lead Them to Water and Pay Them to Drink: An Experiment with Services and Incentives for College Achievement," NBER Working Papers 12790, National Bureau of Economic Research, Inc.
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