Incentive Pay and Social Returns to Worker Effort in Public Programs: Evidence from the Weatherization Assistance Program
Aligning compensation with recipient outcomes has the potential to improve the efficiency of government programs. We perform a field experiment to evaluate the impact of performance bonuses on the returns to spending in a large low-income energy efficiency assistance program. We find that performance-based bonuses dramatically increased program natural gas savings by 24%. The bonuses generate $5.39-$14.53 in social benefits for every dollar invested and increase the social net benefits from home-level weatherization more than two-fold. Contractors performing at high quality at baseline respond disproportionately to the incentives, suggesting that gains in the program's cost-effectiveness result from more efficient allocation of worker effort across workers who differ in their marginal effort cost. We do not find evidence of learning within the two-year study period or of increased deficiencies among non-incentivized tasks.
Non-Technical Summaries
- In a program designed to save energy by promoting home weatherization among low-income households, compensating contractors based on...