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
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Sherry Xin Li: University of Texas at Dallas

No 11521, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Production processes are often organised 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 15% and wasted individual output is lower by 30% when workers are socially connected with their co-workers. Unlike the findings of existing research, increasing the power of group-based financial incentives does not reduce the positive effect of social connections. Our results are driven by men whose average productivity is significantly lower than that of women. These findings can be explained by pro-social behavior of workers in socially connected teams.

Keywords: minimum effort game; financial incentives; social incentives; caste-based networks; coordination; trust (search for similar items in EconPapers)
JEL-codes: C93 D20 D22 D24 J33 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2018-05
New Economics Papers: this item is included in nep-exp, nep-hrm, nep-lma and nep-soc
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Published - published in: Journal of Development Economics, 2020, 144, 102445

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Journal Article: Using social connections and financial incentives to solve coordination failure: A quasi-field experiment in India's manufacturing sector (2020)
Working Paper: Using Social Connections and Financial Incentives to Solve Coordination Failure: A Quasi-Field Experiment in India’s Manufacturing Sector (2019)
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