A reassessment of the potential for loss-framed incentive contracts to increase productivity: a meta-analysis and a real-effort experiment

Paul Ferraro and J Tracy

Working Papers from Chapman University, Economic Science Institute

Abstract: Substantial productivity increases have been reported when incentives are framed as losses rather than gains. Loss-framed contracts have also been reported to be preferred by workers. The results from our meta-analysis and real-effort experiment challenge these claims. The meta-analysis’ summary effect size of loss framing is a 0.16 SD increase in productiv-ity. Whereas the summary effect size in laboratory experiments is a 0.33 SD, the summary effect size from ï¬ eld experiments is 0.02 SD. We de-tect evidence of publication biases among laboratory experiments. In a new laboratory experiment that addresses prior design weaknesses, we estimate an effect size of 0.12 SD. This result, in combination with the meta-analysis, suggests that the difference between the effect size esti-mates in laboratory and ï¬ eld experiments does not stem from the limited external validity of laboratory experiments, but may instead stem from a mix of underpowered laboratory designs and publication biases. More-over, in our experiment, most workers preferred the gain-framed contract and the increase in average productivity is only detectable in the subgroup of workers (∼20%) who preferred the loss-framed contracts. Based on the results from our experiment and meta-analysis, we believe that behav-ioral scientists should better assess preferences for loss-framed contracts and the magnitude of their effects on productivity before advocating for greater use of such contracts among private and public sector actors.

Keywords: framing effects; incentive contracts; meta-analysis; real-effort experiment; and behavioral insights (search for similar items in EconPapers)
JEL-codes: C91 J24 J33 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cbe, nep-cta, nep-exp, nep-hrm and nep-lma
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Journal Article: A reassessment of the potential for loss-framed incentive contracts to increase productivity: a meta-analysis and a real-effort experiment (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:21-20

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