Incentives for Students: Evidence from Two Natural Experiments

Incentives are widely used to increase people’s effort and thus performance. While academic achievement depends heavily on effort, there is little empirical evidence on how students respond to incentives other than grades and monetary rewards. We draw on two natural experiments that occurred at a major European university and use the difference-in-differences approach to show how program and course policies affect the effort and performance of students. Our findings indicate that students perform worse (i) if their effort is rewarded belatedly, (ii) if their effort has little impact on their final grade, or (iii) if they may resit exams more often and thus less effort is required from them.