CDEP-CGEG WORKING PAPER NO. 42

The Selection and Causal Effects of Work Incentives on Labor Productivity: Evidence from a Two-stage Randomized Controlled Trial in Malawi

Hyuncheol Bryant Kim, Seonghoon Kim, and Thomas T. Kim

Abstract:

Different work incentives may affect labor productivity differently. We implement a two-stage field experiment to measure effects of career and wage incentives on labor productivity through self-selection and causal effect channels. First, workers were hired with either career or wage incentives. After employment, a random half of workers with career incentives received wage incentives and a random half of workers with wage incentives received career incentives. We find that career incentives attract higher-performing workers than wage incentives but do not increase productivity conditional on selection. Instead, wage incentives causally increase productivity for existing workers. Observable characteristics are limited in explaining the selection effect. 

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