Journal of Economics and Economic Education Research (Print ISSN: 1533-3590; Online ISSN: 1533-3604)

Abstract

Financial Incentives and Academic Performance: An Experimental Study

Author(s): Noemí Herranz-Zarzoso, Gerardo Sabater-Grande

This paper analyzes the effect of financial incentives on academic performance by means of a randomized field experiment. Using two alternative payment mechanisms was implemented by two experimental treatments designed to motivate students depending on their absolute or relative academic performance. Subjects, recruited among students from Microeconomics, were split in two groups depending on whether they had a failed background in the aforementioned subject (returning students) or not (new students). New students were informed that they would receive a reward depending on their bet (the grade they thought would achieve) and the real grade obtained. In the case of the returning students, the reward was calculated taking into account the bet, the obtained real grade and their improvement with respect to previous semesters. In the first treatment students were rewarded according to a piece rate system whereas in the second one we established two rankings (one for new students and another one for returning students) classifying them depending on their academic performance. In both treatments it can find that the implemented incentives are effective to increase the average of grades for both types of students (new and returning), but the piece rate mechanism is more powerful to motivate a higher number of students.