Culture and incentives: A cross-country field experiment

Project Active from to Firms and Entrepreneurship

Recent survey evidence shows that the most profitable and productive firms tend to adopt personnel policies that link pay to performance and that firms in low-income countries are less likely to use these “good” human resources management practices. Incentive pay is a key component of management strategy, and yet field evidence on the impacts of both individual and team incentives is limited to studies carried out in high-income countries. The mechanisms that lie behind individual responses to incentives go far beyond rational considerations of wage maximization, and encompass concerns for social visibility, preferences for collective work and other behavioural norms. These norms tend to vary by culture, potentially creating considerable heterogeneity in responses to incentives across countries. Oriana Bandiera and Greg Fischer, present evidence from a field experiment designed to evaluate the impact of individual and group monetary incentives and individual and group rank incentives in Accra, Ghana.