When Transparency Fails: Financial Incentives for Local Banking Agents in Indonesia

Erika Deserranno and León-Ciliotta, Gianmarco
Authors registered in the RePEc Author Service: Gianmarco León-Ciliotta ()

No 15714, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the effect of raising the level and the transparency of financial incentives offered to local agents for acquiring clients of a new banking product on take-up. We find that paying agents higher incentives increases take-up, but only when the incentives are unknown to prospective clients. When disclosed, higher incentives instead have no effect on take-up, despite greater agent effort. This is explained by the financial incentives conveying a negative signal about the reliability and trustworthiness of the product and its providers to potential clients. In contexts with limited information about a new technology, financial incentives can thus affect technology adoption through both a supply-side effect (more agent effort) as well as a demand-side signaling effect (change in demand perceptions). Organizations designing incentive schemes should therefore pay close attention to both the level and the transparency of such incentives.

Keywords: Financial incentives; Pay transparency; Technology adoption (search for similar items in EconPapers)
JEL-codes: D84 G28 J31 M52 O14 (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: When Transparency Fails: Financial Incentives for Local Banking Agents in Indonesia (2021)
Working Paper: When transparency fails: Financial incentives for local banking agents in Indonesia (2021)
Working Paper: When transparency fails: Financial incentives for local banking agents in Indonesia (2021)
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