Referendums, citizens' initiatives, and the quality of public goods: Theory and evidence form Swiss Cantons

What makes governments more responsive and how can we create incentives for them to improve the quality of the public good provided by them? This paper tries to give theoretical and empirical insights into this question, that became salient issues as the role of the qualtiy of governance has been recognised, by particulary looking at what the role of direct democratic institutions could play. We present a model with three parties that are elected via proportional representation. Parties need to form coalitions in order to be able to implement policy. Citizens endogenously decide whether to launch a referendum or a citizens' initiatives. By looking at the cost of this process to the citizens we show that when the direct democratic instituions are more open the legislator may increase his effort to provide the public good. We also find that as the cost goes to zero the medain voter preferred outcome will always be implemented. We test this results empirically by looking at the experience of Swiss Cantons that used such institutions extensively. By looking at infant mortality rates and an index of fatal traffic accidents, proxying the quality of the health sector and infrastructure, we find some empirical support that, after controlling for other factors more openness leads to better public goods. The role of religious and linguistic fractionalization is dicussed, too.

Rank Incentives, Social Tournaments, Feedback, Field Experiment

Performance rankings are a very common workplace management practice. Behavioral theories suggest that providing performance rankings to employees, even without pecuniary consequences, may directly shape effort due to the rank’s effect on self-image. In a three-year randomized control trial with full-time furniture salespeople (n=1754), I study the effect on sales performance in a two-by-two experimental design where I vary (i) whether to privately inform employees about their performance rank; and (ii)whether to give benchmarks, i.e. data on the current performance required to be in the top 10%, 25% and 50%. The salespeople’s compensation is only based on absolute performance via a high-powered commission scheme in which rankings convey no direct additional financial benefits. There are two important innovations in this experiment. First, prior to the start of the experiment all salespeople were told their performance ranking. Second, employees operate in a multi-tasking environment where they can sell multiple brands. There are four key results: First, removing rank feedback actually increases sales performance by 11%, or 1/10th of a standard deviation. Second, only men (not women) change their performance. Third, adding benchmarks to rank feedback significantly raises performance, but it is not significantly different from providing no feedback. Fourth, as predicted by the multi-tasking model, the treatment effect increases with the scope for effort substitution across furniture brands as employees switch their effort to other tasks when their rank is worse than expected

Rankings and Social Tournaments: Evidence from a Crowd-Sourcing Experiment

There is a growing interest in behavioral incentive schemes exploiting people preference about how they rank compared to others as a non-monetary mechanism to shape effort. In this paper we present evidence from a crowd-sourcing experiment where employees were given feedback about how they rank in terms of performance compared to others doing the same task. The context is such that rank had no implication for current or future compensation. Compared to a control group with no rank feedback, employees who received feedback about their rank were less likely to return to work and also less productive on the job

Decentralization and the Productive Efficiency of Government: Evidence from Swiss Cantons

Advocates of fiscal decentralization argue that amongst other benefits, it can increase the productive efficiency of delivery of government services. This paper is one of the first to evaluate this claim empirically by looking at the association between expenditure decentralization and the productive efficiency of government using a data-set of Swiss cantons. We first provide careful evidence that expenditure decentralization is a powerful proxy for factual local autonomy. Further panel regressions of Swiss cantons provide robust evidence that more decentralization is associated with higher educational attainment. We also show that these gains lead to no adverse effects across education types but that male students benefited more from educational decentralization closing, for the Swiss case, the gender education gap. Finally, we present evidence of the importance of competence in government and how it can reinforce the gains from decentralization.

Social Incentives in the Workplace

We present evidence on social incentives in the workplace, namely on whether workers’ behavior is affected by the presence of those they are socially tied to, even in settings where there are no externalities among workers due to either the production technology or the compensation scheme in place. To do so we combine data on individual worker productivity from a firm’s personnel records with information on each worker’s social network of friends in the firm. We find that compared to when she has no social ties with her co-workers, a given worker’s productivity is significantly higher when she works alongside friends who are more able than her, and significantly lower when she works with friends who are less able than her. As workers are paid piece rates based on individual productivity, social incentives can be quantified in monetary terms and are such that (i) workers who are more able than their friends are willing to exert less effort and forgo 10% of their earnings; (ii) workers who have at least one friend who is more able than themselves are willing to increase their effort and hence productivity by 10%. The distribution of worker ability is such that the net effect of social incentives on the firm’s aggregate performance is positive. The results suggest that firms can exploit social incentives as an alternative to monetary incentives to motivate workers.conformism, social incentives, social networks

Social Preferences and the Response to Incentives: Evidence from Personnel Data

We present evidence on whether workers have social preferences by comparing workers・productivity under relative incentives, where individual effort imposes a negative externality on others, to their productivity under piece rates, where it does not. We find that the productivity of the average worker is at least 50 percent higher under piece rates than under relative incentives. We show that this is due to workers partially internalizing the negative externality their effort imposes on others under relative incentives, especially when working alongside their friends. Under piece rates, the relationship among workers does not affect productivity. Further analysis reveals that workers internalize the externality only when they can monitor others and be monitored. This rules out pure altruism as the underlying motive of workers・behavior.

Social Connections and Incentives in the Workplace: Evidence from Personnel Data

We present evidence on the effect of social connections between workers and managers on productivity in the workplace. To evaluate whether the existence of social connections is beneficial to the firm's overall performance, we explore how the effects of social connections vary with the strength of managerial incentives and worker's ability. To do so, we combine panel data on individual worker's productivity from personnel records with a natural field experiment in which we engineered an exogenous change in managerial incentives, from fixed wages, to bonuses based on the average productivity of the workers managed. We find that when managers are paid fixed wages, they favor workers to whom they are socially connected irrespective of the worker's ability, but when they are paid performance bonuses, they target their effort towards high ability workers irrespective of whether they are socially connected to them or not. Although social connections increase the performance of connected workers, we find that favoring connected workers is detrimental for the firm's overall performance.natural field experiment, managerial incentives, favoritism

Social Incentives in the Workplace

We present evidence on social incentives in the workplace, namely on whether workers\u27 behaviour is affected by the presence of those they are socially tied to, even in settings where there are no externalities among workers due to either the production technology or the compensation scheme in place. To do so, we combine data on individual worker productivity from a firm\u27s personnel records with information on each worker\u27s social network of friends in the firm. We find that compared to when she has no social ties with her co-workers, a given worker\u27s productivity is significantly higher when she works alongside friends who are more able than her, and significantly lower when she works with friends who are less able than her. As workers are paid piece rates based on individual productivity, social incentives can be quantified in monetary terms and are such that (i) workers who are more able than their friends are willing to exert less effort and forgo 10% of their earnings; (ii) workers who have at least one friend who is more able than themselves are willing to increase their effort and hence productivity by 10%. The distribution of worker ability is such that the net effect of social incentives on the firm\u27s aggregate performance is positive. The results suggest that firms can exploit social incentives as an alternative to monetary incentives to motivate workers

Intermediated Social Preferences: Altruism in an Algorithmic Era

What are the consequences of intermediating moral responsibility through complex organizations or transactions? This paper examines individual decision-making when choices are known to be obfuscated under randomization. It reports the results of a data entry experiment in an online labor market. Individuals enter data, grade another individual’s work, and decide to split a bonus. However, before they report their decision, they are randomized into settings with different degrees of intermediation. The key finding is that less generosity results when graders are told the split might be implemented by a new procurement algorithm. Those whose decisions are averaged or randomly selected among a set of graders are more generous relative to the asocial treatment. These findings relate to “the great transformation” whereby moral mentalities are shaped by modes of (a)social interaction

Rank Incentives Evidence from a Randomized Workplace Experiment ∗

Performance rankings are a very common workplace management practice. Behavioral theories suggest that providing performance rankings to employees, even without pecuniary consequences, may directly shape effort due to the rank’s effect on self-image. In a three-year randomized control trial with full-time furniture salespeople (n=1754), I study the effect on sales performance in a two-by-two experimental design where I vary (i) whether to privately inform employees about their performance rank; and (ii) whether to give benchmarks, i.e. data on the current performance required to be in the top 10%, 25 % and 50%. The salespeople’s compensation is only based on absolute performance via a high-powered commission scheme in which rankings convey no direct additional financial benefits. There are two important innovations in this experiment. First, prior to the start of the experiment all salespeople were told their performance ranking. Second, employees operate in a multi-tasking environment where they can sell multiple brands. There are four key results: First, removing rank feedback actually increases sales performance by 11%, or 1/10 th of a standard deviation. Second, only men (not women) change their performance. Third, adding benchmarks to rank feedback significantly raises performance, but it is not significantly different from providing no feedback. Fourth, as predicted by the multi-tasking model, the treatment effect increases with the scope for effort substitution across furniture brands as employees switch their effort to other tasks when their rank is worse than expected