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Learning for a bonus: How financial incentives interact with preferences

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  • Uschi Backes-Gellner

    (Department of Business Administration, University of Zurich)

  • Yvonne Oswald

    (Department of Business Administration, University of Zurich)

Abstract

This paper investigates the effect of financial incentives on student performance and analyzes for the first time how the incentive effect in education is moderated by students’ risk and time preferences. To examine this interaction we use a natural experiment that we combine with data from surveys and economic experiments on risk and time preferences. We not only find that students who are offered financial incentives for better grades have on average better first- and second-year grade point averages, but more importantly, we find that highly impatient students respond more strongly to financial incentives than less impatient students. This finding suggests that financial incentives are most effective if they solve educational problems of myopic students.

Suggested Citation

  • Uschi Backes-Gellner & Yvonne Oswald, 2012. "Learning for a bonus: How financial incentives interact with preferences," Economics of Education Working Paper Series 0079, University of Zurich, Department of Business Administration (IBW).
    • Handle: RePEc:iso:educat:0079
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    Cited by:

    1. Andreoni, James & Kuhn, Michael A. & List, John A. & Samek, Anya & Sokal, Kevin & Sprenger, Charles, 2019. "Toward an understanding of the development of time preferences: Evidence from field experiments," Journal of Public Economics, Elsevier, vol. 177(C), pages 1-1.
    2. Backes-Gellner, Uschi & Herz, Holger & Kosfeld, Michael & Oswald, Yvonne, 2021. "Do preferences and biases predict life outcomes? Evidence from education and labor market entry decisions," European Economic Review, Elsevier, vol. 134(C).
    3. Peter Hoeschler & Uschi Backes-Gellner, 2017. "The Relative Importance of Personal Characteristics for the Hiring of Young Workers," Economics of Education Working Paper Series 0142, University of Zurich, Department of Business Administration (IBW), revised Jan 2018.
    4. Cala, Petr & Havranek, Tomas & Irsova, Zuzana & Matousek, Jindrich & Novak, Jiri, 2022. "Financial Incentives and Performance: A Meta-Analysis of Economics Evidence," CEPR Discussion Papers 17680, C.E.P.R. Discussion Papers.
    5. Mohrenweiser, Jens & Zwick, Thomas & Backes-Gellner, Uschi, 2013. "Poaching and firm-sponsored training: First clean evidence," ZEW Discussion Papers 13-037, ZEW - Leibniz Centre for European Economic Research.
    6. Jens MohrenweiserBy & Gabriele Wydra-Somaggio & Thomas Zwick, 2020. "Information advantages of training employers despite credible training certificates," Oxford Economic Papers, Oxford University Press, vol. 72(3), pages 651-671.
    7. Miriam Rinawi & Uschi Backes-Gellner, 2020. "Firms’ method of pay and the retention of apprentices," Oxford Economic Papers, Oxford University Press, vol. 72(1), pages 269-291.
    8. Datar, Ashlesha & Nicosia, Nancy & Samek, Anya, 2023. "Heterogeneity in place effects on health: The case of time preferences and adolescent obesity," Economics & Human Biology, Elsevier, vol. 49(C).
    9. Bieberstein, Frauke von & Jaussi, Stefanie & Vogel, Claudia, 2020. "Challenge-seeking and the gender wage gap: A lab-in-the-field experiment with cleaning personnel," Journal of Economic Behavior & Organization, Elsevier, vol. 175(C), pages 251-277.
    10. Jens Mohrenweiser & Thomas Zwick & Uschi Backes‐Gellner, 2019. "Poaching and Firm‐Sponsored Training," British Journal of Industrial Relations, London School of Economics, vol. 57(1), pages 143-181, March.
    11. Patricia Palffy & Patrick Lehnert & Uschi Backes‐Gellner, 2023. "Social norms and gendered occupational choices of men and women: Time to turn the tide?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 62(4), pages 380-410, October.
    12. Mohrenweiser, Jens & Wydra-Sommaggio, Gaby & Zwick, Thomas, 2015. "Work-related ability as source of information advantages of training employers," ZEW Discussion Papers 15-057, ZEW - Leibniz Centre for European Economic Research.
    13. Eugster, Beatrix & Balestra, Simone & Liebert, Helge, 2017. "The Effect of School Starting Age on Special Needs Incidence and Child Development into Adolescence," CEPR Discussion Papers 12515, C.E.P.R. Discussion Papers.
    14. Eggenberger, Christian & Rinawi, Miriam & Backes-Gellner, Uschi, 2018. "Occupational specificity: A new measurement based on training curricula and its effect on labor market outcomes," Labour Economics, Elsevier, vol. 51(C), pages 97-107.
    15. Uschi Backes-Gellner, 2021. "Insights into the Economic Benefits of VPET for Individuals: Theoretical and Empirical Results for Researchers and Practitioners," Economics of Education Working Paper Series 0180, University of Zurich, Department of Business Administration (IBW).
    16. Poutvaara, Panu & Ropponen, Olli, 2018. "Shocking news and cognitive performance," European Journal of Political Economy, Elsevier, vol. 51(C), pages 93-106.
    17. Ashlesha Datar & Nancy Nicosia & Anya Samek, 2022. "Heterogeneity in Place Effects on Health: The Case of Time Preferences and Adolescent Obesity," NBER Working Papers 29935, National Bureau of Economic Research, Inc.
    18. Mohrenweiser Jens & Pfeiffer Friedhelm, 2015. "Coaching Disadvantaged Young People: Evidence from Firm Level Data," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 235(4-5), pages 459-473, August.
    19. Hoeschler, Peter & Balestra, Simone & Backes-Gellner, Uschi, 2018. "The development of non-cognitive skills in adolescence," Economics Letters, Elsevier, vol. 163(C), pages 40-45.
    20. Tan, Xue & Yu, Lin & Fung, Hung-Gay, 2022. "Firms with short-termism: Evidence from expatriate controlling shareholders," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
    21. Metcalfe, Robert & Burgess, Simon & Proud, Steven, 2019. "Students' effort and educational achievement: Using the timing of the World Cup to vary the value of leisure," Journal of Public Economics, Elsevier, vol. 172(C), pages 111-126.

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    More about this item

    Keywords

    Student performance; Financial incentive; Time preference; Risk preference;
    All these keywords.

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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