A New Approach to an Age-old Problem: Solving Externalities by Incenting Workers Directly
Presented by:
Robert Metcalfe
Becker Friedman Institute for Research in Economics
University of Chicago
Friday, December 4, 2015
12:00 pm-1:00 pm
Taylor-Hibbard Seminar Room (Rm103)
Understanding motivations in the workplace remains of utmost import as economies around the world rely on increases in labor productivity to foster sustainable economic growth. This study makes use of a unique opportunity to “look under the hood” of an organization that critically relies on worker effort and performance. By partnering with Virgin Atlantic Airways on a field experiment that included over 40,000 unique flights covering an eight-month period, we are able to explore how incentives affect captains’ performance. Making use of more than 110,000 captain-level observations, we find that our set of treatments—which included performance information, personal targets, and pro-social incentives—induced captains to improve efficiency in all three key flight areas: pre-flight, in-flight, and post-flight. We estimate that our treatments lowered input costs, improved productive efficiency, and led to a marginal abatement cost of -$250 for a tonne of CO2 over the eight-month experimental period. Methodologically, our approach highlights the potential usefulness of moving beyond an experimental design that focuses on short-run substitution effects, and it also suggests a new way to combat firm-level externalities: target workers rather than the firm as a whole.