While performance-based ranking may induce workers to increase effort because of status concerns, such information may also demotivate them or make them wary of outperforming peers. This paper by disentangles the effects of demotivation, social conformity and status associated with ranking. The author implements a randomized experiment at a Bangladeshi sweater factory that pays employees on piece rates. Treated workers receive monthly information on their relative performance either in private or in public. A simple theoretical framework shows that intrinsic status concerns induce Private Treatment workers to increase or decrease effort depending on the feedback they receive from the intervention. Workers in Public Treatment respond similarly but face two additional incentives - social status (positive effect) and social conformity (negative effect). Empirical evidence shows that Private Treatment workers increased (decreased) effort upon receiving positive (negative) feedback. Public ranking led to lower net effort relative to Private Treatment because of a strong preference not to outperform friends. The negative effects from demotivation and social conformity may explain why the existing literature finds mixed evidence of impact of ranking workers.
This research was funded under the Private Enterprise Development in Low-Income Countries (PEDL) Programme
Ashraf, A. (2018) Do Performance Ranks Increase Productivity? Evidence from a Field Experiment, PEDL