Ashraf, Anik (LMU Munich)
Can a firm increase its workers’ effort by introducing competition through performance-based ranking? On one hand such ranking can increase effort because of individuals’ desire for status from high ranks, but on the other, it can demotivate them or make them wary of outperforming peers. This paper disentangles the effects of demotivation, social conformity, and status associated with ranking through a randomized experiment at a Bangladeshi sweater factory. Treated workers receive monthly information on their relative performance either in private or in public. Both a simple theoretical framework and empirical evidence from the field show that workers’ intrinsic desire to be good at work induces privately ranked workers to increase effort upon receiving positive feedback, but they get demotivated and decrease effort upon receiving negative feedback. Public ranking lead to lower net effort relative to private ranking because of a strong preference not to outperform friends. The negative effects from demotivation and social conformity may explain why the existing literature finds mixed evidence of impact of ranking workers.
peer effects; productivity; rank incentives
D23; J53; O15