Incentives Justifying Nonconformity

Incentives Justifying Nonconformity

Seminario del Navarra Center for International Development titulado 'Incentives Justifying Nonconformity: Experimental Evidence from Motortaxi Organizations in Uganda'.

Ponente: 
Claude Raisaro (Stockholm School of Economics).

Abstract:
What role do financial incentives play in mitigating harmful peer norms? This paper studies whether financial incentives can be more powerful when they help justify choices that have social image costs among peers. I test this hypothesis in the high-stakes context of road safety in low-income countries. I run multiple experiments with 360 motor taxi drivers in Uganda, offering financial incentives to avoid speeding. First, I provide incentivized evidence that speeding is viewed as admirable among coworkers. In a Demand Experiment, I randomize the visibility of incentives to coworkers and show that (i) drivers are more likely to take up financial incentives when they can be used as justification. In an Impact Experiment, I find that randomly offering visible incentives with justification properties is (ii) twice as effective in promoting compliance with speed regulation relative to private incentives, and (iii) has a positive effect on drivers’ productivity. At least since Coase, economists have considered financial incentives as a tool to reward desirable behavior. This paper illustrates that they can also reduce the social image costs to defy peer norms, achieving the same behavioral change with lower but visible monetary incentives.