Never Enough: Dynamic Status Incentives in Organizations

Leonardo Bursztyn, Ewan Rawcliffe and Hans-Joachim Voth

No 21121, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the ability of a firm to elicit repeated effort from workers by creating a "rat race" of hierarchical status-based incentives. We examine performance using data on over 5,000 German air force pilots during World War II. Pilots' effort is hard to monitor; motivation is key to success. Fighter pilot performance increases markedly as they approach eligibility for a medal before falling off upon receipt of the award. The same effort path repeats itself as the pilot nears the next higher-prestige medal. Status-conscious pilots also exert more effort when new medals are introduced. We show that medals serve as substitutes for other forms of status. Medal cachet declines over time as lower-ability pilots receive them, making the introduction of new medals desirable. These results suggest that a tiered, expanding system of status-based incentives can repeatedly leverage worker status concerns to extract effort.

Keywords: Status competition; Nonfinancial incentives (search for similar items in EconPapers)
JEL-codes: D22 D91 M55 N44 (search for similar items in EconPapers)
Date: 2026-02
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