Performance Bonuses in the Public Sector: Winner-Take-All Prizes Versus Proportional Payments to Reduce Child Malnutrition in India

Abstract

We conduct a randomized trial to compare incentives for improved child outcomes among salaried caregivers in Chandigarh, India. A contest whose prize is divided among workers in proportion to measured gains yielded more improvement than a winner-take-all program. In our population of about 2000 children served by 85 workers, using proportional rewards led to weight-for-age malnutrition rates that were 4.3 percentage points lower at 3 months (when rewards were paid) and 5.9 points lower at 6 months (after the contest had ended), with mean weight-for-age z scores that were 0.071 higher at 3 months, and 0.095 higher at 6 months. Proportional bonuses led to larger and more sustained gains because of better performance by lower-ranked workers, whose efforts were not rewarded by a winner-take-all prize. Results are consistent with previous laboratory trials and athletic events, demonstrating the value of proportional rewards to improve development outcomes.

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