Using Incentives to Improve
Outcomes:
North-South Knowledge Sharing on
Conditional Cash Transfer Programs
Lawrence Aber
New York University
Laura Rawlings
World Bank
Outline
I.
The Context: First generation CCTs
in the Global South/Latin America
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II.
New thinking on the role of welfare reform.
The place of CCTs in welfare reform
The focus: Second generation CCTs
globally
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Lessons and questions
Re-examining incentives
Outline (continued)
III.
The Social and Behavioral Science of
Incentives:
A. Empirical studies of financial
incentives (not holistic CCTs).
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Variations in Key Dimensions.
B. Theoretical perspectives on the
design and influence of financial
incentives.
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Three Illustrations:
(a) Psychology: Self-Determination Theory
(b) Sociology: Social Capital, Social Control and
Human Ecology Theories
(c) Behavioral Economics.
Outline (continued)
IV.
Building tests of theory into
evaluations of CCTs:
The Opportunity NYC/Family
Rewards “Embedded” Study.
I. Context: First generation
CCTs
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CCTs part of broader welfare reform
movement
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Focus on households/demand side
Use of incentives
Use of evaluation
Focus on building human capital
Promising evaluation results on use of
social services, poverty reduction
II. The Focus: Second
Generation CCTs
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Questions left from first generation
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Are results replicable?
Graduation, labor market participation?
How to improve long-term outcomes?
 Leads back to focus on incentives and
how they are used
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Incentivize final outcomes?
Tailor incentives to populations/households
Menu of incentives?
 Calls for a better understanding and
testing/evaluation of how incentives work
III.A - Empirical Studies of
Financial Incentives
Domains
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•
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Health (11 studies and 2 meta-analyses)
Education (18 studies; 10 U.S. and 8
International)
Work (12 studies)
Selection Criteria
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•
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Conditional financial incentive (NOT CCTs)
Primary focus on low-income population
Methodologically sound
Published since 1991.
Findings
Health
- incentives often effective in
promoting simple, short-term
change
- incentives sometimes effective in
promoting complex, long term
change.
Education - majority of U.S. and international
studies showed positive effects on
school enrollment, attendance
and academic progress (grades,
grades completed, graduation).
- virtually no evidence of effects on
other outcomes.
Findings (continued)
Work
- Work incentives speed up
employment but the boost is
temporary… controls catch up.
- Work incentives increase
earnings and sometimes total
household income.
- Indirect effects on children?
• Positive for elementary-aged
children!
• Unclear for adolescents?
Variations in Key Dimensions
•
Nature of Behavior
Incentivized
•
Nature of Incentive
•
Target Population
•
Nature of
Conditionality
Additional
Supports/
Services
• Nature of the
“Context”
•
III-B. Theoretical Perspectives
on the Design and Influence of
Financial Incentives
1.
Psychological Theories

Self-Determinational Theory (Deci)

Dynamic Skill Theory (Fischer)

Bio-Ecological Theory
(Bronfenbrenner)

“Stages of Change” Theory
Theoretical Perspectives
(continued)
2.
Sociological Theories

Social Control Theory/Norms and
Behavioral Control

Social Capital Theory/Relationships
and Networks

Social Disorganization
Theory/Concentration and other
effects.
Theoretical Perspectives
(continued)
3.
Economic Theories
Neo-Classical Economic Concepts:
Incentives…
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Reduce opportunity costs.
Improve clarity of systems messages about
what is valuable.
Promote investments in human capital
Behavioral Economic Concepts:
“The Choice Architecture”
Illustrations of Theory-based
Hypotheses and Explanations
Example #1: Paying children for taking
and passing tests.
Self-Determination Theory: Reliance on
extrinsic rewards (like financial
incentives) will reduce intrinsic
motivation (in short run) and academic
achievement (in long run).
Early studies focused on Intrinsic
Motivation.
1.
2.
3.
Intrinsic motivation is associated with
better learning, performance and wellbeing.
Extrinsic rewards (as well as threats,
surveillance, evaluation and deadlines)
undermine intrinsic motivation.
Providing choice, acknowledging
people’s inner experiences, positive
feedback enhance intrinsic motivation.
The Mediating Role of Basic Psychological
Needs: Competence, Autonomy, Relatedness
More recent studies focus on fuller
consideration of extrinsic motivation: A
continuum of types of regulation.
0. Non-regulation
3. Identified
Regulation
1. External
Regulation
4. Integrated
Regulation
2. Introjected
Regulation
5. Intrinsic
Motivation
The Process of Internalization and
Integration of Extrinsic Motives is:
•
•
a natural developmental process,
but is strongly affected by the degree to
which fulfillment of basic psychological
needs is supported as they engage in
the relevant behavior.
Factors that facilitate internalization
and integration of extrinsic motives:
•
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Feelings of relatedness to socializing
others.
Feelings of competence with respect to
the regulation being internalized (e.g.
ability to grasp or understand the
meaning or rationale behind the
regulation; ability to enact it).
An opportunity for the individual to
freely process and endorse the
transmitted value/regulation.
Factors affecting regulation of
UNINTERESTING ACTIVITIES:
•
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A meaningful rationale for why the
target behavior is important.
Acknowledgement that activities may
not be intrinsically interesting.
An emphasis on choice (feeling free
to accept responsibility for the
behavior).
Illustrations (continued)
Example #2: Implementing a Financial
Incentive Experiment
•
for all eligible (via a placerandomized trial).
•
for selected individuals (via
individual-randomized trial).
Bio-ecological, Social Capital and Social
Control Theories re: concentration and
peer effects.
Illustrations (continued)
Example #3: Building on insights from
behavioral economics in
designing next generation CCTs
(e.g. Amir et al., 2005; Bertrand
et al., 2006.
1. Introduce CCTs via small discussion groups
(vs. individual interviews).
2. Reduce cognitive load and improve
information processing regarding incentives.
Illustrations (continued)
3.
4.
5.
“Prime the right identities” in introducing
CCTs to poor individuals and subcommunities.
Reduce the danger of killing intrinsic
motivation by framing CCTs in an
autonomy promoting manner.
Communicate about CCTs in a manner
that conforms to people’s “mental
accounting schemes”.
Building tests of theory into evaluations of
CCTs: The ONYC/FR “Embedded Study”.
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Sub-study of Core Study.
Focus on only 1 of 3 age cohorts (due to
funding constraints) at 24 months.
Proposals submitted to study all 3 age cohorts
at 48 months.
Theory of Change and Measurement Strategy.
Current status; next steps.
Testing “competing” hypotheses
about “mechanisms of effect”
behavioral
engagement
academic
performance
selfefficacy
Incentives
behavioral
compliance
intrahousehold
resource
allocation
Incentives
child (& parent)
time use
extrinsic
motivation
intrinsic
motivation
Mediating
Processes
academic
performance
Targeted &
Nontargeted
Outcomes
IV. Implications of Prior Studies and lack
of Theory for Opportunity NYC
(and other CCTs).
1.
2.
Where does ONYC fall among the
variations in fiscal incentive
initiatives?
What theories could be used to
continue to inform: the evaluation
of ONYC; the interpretation of
findings; the redesign of future CCT
initiatives in NYC?
Implications (continued)
3.
4.
5.
What do politicians and program
executives need to know in
designing incentive strategies?
What do evaluators and researchers
need to know in designing studies
of incentive strategies?
How can funders promote
implementation and cost-effective
studies to complement impact
studies?
The Advantages of Greater Attention to
Social and Behavioral Science Theory in
Studies of Financial Incentives.
1.
2.
3.
Easier to integrate and synthesize
findings across studies.
Able to design tests of rival
explanations for results.
Knowledge from prior studies will
correlate more efficiently and
therefore inform future policy
incentives more powerfully.