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When transparency fails: Financial incentives for local banking agents in Indonesia

Erika Deserranno, Gianmarco León-Ciliotta and Firman Witoelar

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

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)
Pages: 51 pages
Date: 2021
New Economics Papers: this item is included in nep-lma and nep-sea
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Working Paper: When Transparency Fails: Financial Incentives for Local Banking Agents in Indonesia (2021) Downloads
Working Paper: When transparency fails: Financial incentives for local banking agents in Indonesia (2021) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:pas:papers:2021-04

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