Hierarchy and Performance Pay: Experimental Evidence from the Public Sector

Frontline workers in public bureaucracies perform multidimensional tasks and rely on supervisors who both monitor performance and supply essential managerial inputs. We study how incentive design should account for these interactions using a conceptual framework and a province-wide randomized experiment with the Punjab Agriculture Extension Department in Pakistan. Across 131 tehsils, we compare: (i) an Objective pay-for-performance scheme tied to digital activity metrics; (ii) a Subjective scheme in which supervisors allocate bonuses; and (iii) a Subjective Plus scheme that preserves discretion but introduces light-touch oversight of supervisors.
All three schemes increase outreach, but through distinct channels. Objective incentives primarily raise intensive effort—repeat visits to the same farmers—while Subjective Plus expands the extensive margin by inducing supervisors to schedule more farmer trainings and broaden geographic coverage. Contrary to standard multitasking concerns, meeting length—a proxy for engagement quality—increases across all arms.
Oversight of supervisors also reduces favoritism in bonus allocation and improves merit-based evaluation, leading to greater access and yield gains among marginalized farmers. The results show that light-touch monitoring of middle management can substantially amplify the effectiveness and equity of performance pay in multi-layered bureaucracies.