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Using Social Connections and Financial Incentives to Solve Coordination Failure: A Quasi-Field Experiment in India’s Manufacturing Sector

Farzana Afridi, Amrita Dhillon, Sherry Xin Li and Swati Sharma
Additional contact information
Amrita Dhillon: King’s College London
Sherry Xin Li: University of Arkansas
Swati Sharma: Indian Statistical Institute, Delhi

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: Production processes are often organized in teams, yet there is limited evidence on whether and how social connections and financial incentives affect productivity in tasks that require coordination among workers. We simulate assembly line production in a lab-in-the-field experiment in which workers exert real effort in a minimum-effort game in teams whose members are either socially connected or unconnected and are paid according to the group output. We find that group output increases by 18% and coordination improves by 30-39% when workers are socially connected with their co-workers. Connected groups also coordinate better when we introduce a lump sum bonus, suggesting that financial and social incentives can be complementary in this setting. These findings can plausibly be explained by trust between co-workers in socially connected teams.

Keywords: caste-based networks; social incentives; financial incentives; minimum effort game; coordination; trust JEL Classification: C93; D20; D22; D24; J33 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-exp, nep-hrm, nep-lma and nep-soc
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https://warwick.ac.uk/fac/soc/economics/research/c ... 417-2019_dhillon.pdf

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