Social and Monetary Incentives

Social Incentives Matter: Evidence from an Online Real Effort Experiment, Tonin, Mirco (University of Southampton), Vlassopoulos, Michael (University of Southampton)

Contributing to a social cause can be an important driver for workers in the public and non-profit sector as well as in firms that engage in Corporate Social Responsibility activities. This paper compares the effectiveness of social incentives to financial incentives using an online real effort experiment. We find that social incentives lead to a 20% rise in productivity, regardless of their form (lump sum or related to performance) or strength. When subjects can choose the mix of incentives half sacrifice some of their private compensation to increase social compensation, with women more likely than men. Furthermore, social incentives do not attract less productive subjects, nor subjects that respond more to exogenously imposed social incentives. Our calculations suggest that a dollar spent on social incentives is equivalent to increasing private compensation by at least half a dollar.

2 thoughts on “Social and Monetary Incentives

  1. Um, so the headline was meant to read:

    Social Incentives Matter (a bit, but are a waste of money): Evidence from an Online Real Effort Experiment,

    ?

    Don’t get me wrong, I’m all for some of this stuff, but the conclusion seems just a little softer than the heading!

    • If you work your way to the end:

      Our results indicate that social incentives may be less effective than private incentives in motivating workers, but the difference is not as large as one might have expected. A sufficient degree of tax incentives, or sufficient additional advantages coming from customers, regulators, or investors, would make social incentives comparable to private incentives.

      I think the point is that “social incentives” allow a mild double-dip capability where you tell your employees, “You can do the right thing and contribute to the social good.”

      Then you tell your customers, and your investors, “Our company does the right thing and contributes to the social good.”

      Then you tell the taxman, “We deserve a tax bonus for contributing to the social good.”

      Needless to say, it’s the same charity dollar that you have on display to each group, but none of those groups goes and compares notes with the other groups.

      **touch side of nose twice**

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