Yamit Asulin, Yuval Heller, Nira Munichor

March 23th, 2023

Abstract
Multiple studies suggest that, contrary to economic rationale, offering monetary incentives to complete a task can negatively affect task performance. This phenomenon is attributed to so-called crowding-out effects, in which monetary rewards “crowd out” non-monetary sources of value that people derive from task completion (e.g., intrinsic value of the task; social recognition). Yet, recent work calls the validity of crowding-out effects into question. In this study, we revisit a well-known field experiment by Gneezy and Rustichini (2000) that provides evidence for crowding-out effects in the context of prosocial behavior. We test the robustness of these effects using a larger sample and adjust the experiment’s design to better elucidate the role of non-monetary incentives in prosocial behavior. Specifically, we give 245 pairs of high school students different incentives to collect donations for charity: low monetary incentives (1% of the total donations collected), high monetary incentives (10% of the total donations collected), non-monetary incentives (a better sense of the task’s importance and public recognition), or no external incentives. In line with crowding-out effects and Gneezy and Rustichini’s (2000) findings, our results show that low monetary incentives elicit lower performance (collected donations) compared with the absence of external incentives. Importantly, non-monetary incentives elicit higher performance compared with either monetary incentive or the absence of external incentives.

JEL Classification:C93, D64, Z13.

Keywords: Prosocial behavior, Crowding out, Field experiments, Non-monetary incentives, Monetary incentives, Real-effort experiment