Job Market Seminar.
Micro-firm owners have incomplete information about attainable incomes, and their relative performance standing. This might affect their beliefs about the quality of their business network and the returns to effort. Incorrect beliefs in turn, lead to sub-optimal choices that stunt firm growth. In this paper, I study whether feedback on relative performance standing affects beliefs and, as a consequence, firm output. I exploit data from a unique field experiment in Mozambique that provides novel causal evidence of the effect of performance rankings on firm outputs. One year after the intervention, at baseline high-performers are not affected by the treatment as the ranking contains only limited new information for them. However, low-performing firm owners at baseline significantly increase their revenues compared to low-performers in a control group. Treated low-performers close the performance gap to high-performing peers by 43%. This effect is, to a large degree, explained by significant increases in work hours and pro-social behavior. Exploiting variation in the observability of peer characteristics, I show that the treatment is particularly effective when subjects observe that the most successful peer is a woman. Low-performers that, additionally to their own ranking, observe a female top seller, outperform at baseline high-performers by 14%.
Julia Seither is an economics PhD student at the Universidade Nova de Lisboa. Profile.