The importance of relative performance feedback information: Evidence from a natural experiment using high school students

We study the effect of providing relative performance feedback information on performance, when individuals are rewarded according to their absolute performance. A natural experiment that took place in a high school offers an unusual opportunity to test this effect in a real-effort setting. For one year only, students received information that allowed them to know whether they were performing above (below) the class average as well as the distance from this average. We exploit a rich panel dataset and find that the provision of this information led to an increase of 5% in students' grades. Moreover, the effect was significant for the whole distribution. However, once the information was removed, the effect disappeared. To rule out the concern that the effect may be artificially driven by teachers within the school, we verify our results using national level exams (externally graded) for the same students, and the effect remains.     

Targeting fertility and female participation through the income tax

We evaluate the effect of a 2003 reform in the Spanish income tax on fertility and the employment of mothers with small children. The reform introduced a tax credit for working mothers with children under the age of three, while also increasing child deductions for all households with children. Theoretically, given the interplay of these two components, the expected effect of the reform is ambiguous on both outcomes. We find that the combined reforms significantly increased both fertility (by almost 5%) and the employment rate of mothers with children under three (by 2%). These effects were more pronounced among less-educated women. In addition, to disentangle the impact of the two reform components, we use an earlier reform that increased child deductions in 1999. We find that the child deductions affect mothers' employment negatively, which implies that the 2003 tax credit would have increased employment even more (up to 5%) in the absence of the change in child deductions.     

The Provision of Relative Performance Feedback: An Analysis of Performance and Satisfaction

This paper studies the effect of providing relative performance feedback on individuals’ performance, under two incentive schemes. In a laboratory setup, agents perform a real‐effort task. We show that relative performance feedback increases performance when performance is related to pay (piece‐rate) but has no effect on performance when pay is independent of performance (flat‐rate). These effects are independent of the agent's relative position. Subjects are also asked to rate their satisfaction during the experiment. We find that under flat‐rate, feedback has no effect on agents’ satisfaction, while under piece‐rate, feedback about relative position affects satisfaction.     

Credit layering in informal financial markets

Informal lenders with access to markets or capital often find it attractive to delegate loan provision to downstream lenders who have an information or enforcement advantage in dealing with particular borrowers. In this paper we examine the conditions under which such an arrangement is preferred by two informal lenders, a landlord and a merchant, who compete in loan provision to tenant farmers differentiated by wealth. We show that credit layering is preferred only when tenants are sufficiently poor. In this case, the trader lends to tenant farmers via a contract with their landlord. Otherwise, only the trader lends. As a consequence, a pattern of borrowing emerges in which relatively wealthy tenants borrow from merchants while poor tenants borrow mainly from their landlords. Interlinkage between land and credit thus arises only for a subset of tenants and purely as a consequence of credit layering. This pattern is shown to be supported empirically.     

Evaluating the effectiveness of in-work tax credits

One of the principle aims of the Working Families’ Tax Credit in the UK was to increase the participation of single mothers in work. The difference-in-differences methodology that is typically used to evaluate tax credit policies compares single mothers with single women without children. However, the characteristics of these groups are very different, and changes over time in relative covariates are likely to violate key identifying assumptions. We find that when we control for differential trends between women with and without children, the employment effect of the policy falls significantly. Moreover, closer inspection shows that while there was an effect on increasing the likelihood to work full-time (30 h or more), there was no effect on reducing the likelihood to be inactive. Looking closely at important covariates before and after the policy introduction, we can see sizeable changes in the relative returns to employment between the treatment and control groups, making it difficult to assess the policy effectiveness.     

Two planar facility location problems with high-speed corridors and continuous demand

The planar minisam (‘median’) and minimax (‘center’) facility location problems are examined under the assumptions that: demand is continuously and uniformly distributed: the L₁ (right-angle) metric is in use; and the planar region is traversed by a high-speed corridor (highway) running parallel to one of the directions of travel. For the minisum problem in a rectangular region, it is shown that, for any combination of problem parameters, there are only two candidate points in the region for the optimum location of the facility. This is also shown to be true for any convex and symmetric planar region. For the minimax problem in a rectangular region, there are only three candidate points for the optimal location. Some extensions and conjectures for the minisum problem involving more than one highway are also discussed.     

Competition among contests

When several contests compete for the participation of a common set of players, a contest's allocation of prizes not only induces incentive effects but also participation effects. Our model predicts that an increase in the sensitivity with which contest outcomes depend on players' efforts makes flatter prize structures more attractive to participants. In equilibrium, contests that aim to maximize the number of participants will award multiple prizes if and only if this sensitivity is sufficiently high. Moreover, the prize awarded to the winner is decreasing in the contests' sensitivity. We provide empirical evidence from professional road running using race–distance as a measure of sensitivity. We show that steeper prize structures are more attractive to top‐ranked runners in longer, that is, less sensitive, races. In line with our theory, longer races do in fact offer steeper prize structures.     

Community-Based and -Driven Development: A Critical Review

Community-based and -driven development projects have becomean important form of development assistance, with the WorldBank's portfolio alone approximating $7 billion. A review oftheir conceptual foundations and evidence on their effectivenessshows that projects that rely on community participation havenot been particularly effective at targeting the poor. Thereis some evidence that such projects create effective communityinfrastructure, but not a single study establishes a causalrelationship between any outcome and participatory elementsof a community-based development project. Most such projectsare dominated by elites, and both targeting and project qualitytend to be markedly worse in more unequal communities. A distinctionbetween potentially "benevolent" forms of elite domination andmore pernicious types of capture is likely to be important forunderstanding project dynamics and outcomes. Several qualitativestudies indicate that the sustainability of community-basedinitiatives depends crucially on an enabling institutional environment,which requires government commitment, and on accountabilityof leaders to their community to avoid "supply-driven demand-driven"development. External agents strongly influence project success,but facilitators are often poorly trained, particularly in rapidlyscaled-up programs. The naive application of complex contextualconcepts like participation, social capital, and empowermentis endemic among project implementers and contributes to poordesign and implementation. The evidence suggests that community-basedand -driven development projects are best undertaken in a context-specificmanner, with a long time horizon and with careful and well-designedmonitoring and evaluation systems.      

Incentives,supervision, and sharecropper productivity

Though sharecropping remains widespread, its determinants are still poorly understood and the debate over the extent of moral hazard is far from settled. We address both issues by analyzing the role of landlord supervision. When landlords vary in their cost of supervision, otherwise identical share-tenants can have different productivity. Unique data on monitoring frequency collected from share-tenants in rural Pakistan confirms that, controlling for selection, ‘supervised’ tenants are significantly more productive than ‘unsupervised’ ones. Also, landlords' decisions regarding monitoring and incentives offered to tenants depend importantly on the cost of supervision.