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Learning for a bonus: How financial incentives interact with preferences


Backes-Gellner, Uschi; Oswald, Yvonne (2012). Learning for a bonus: How financial incentives interact with preferences. Swiss Leading House Working Paper 79, University of Zurich.

Abstract

This paper investigates the effect of financial incentives on student performance and analyzes for the first time how the incentive effect in education is moderated by students’ risk and time preferences. To examine this interaction we use a natural experiment that we combine with data from surveys and economic experiments on risk and time preferences. We not only find that students who are offered financial incentives for better grades have on average better first- and second-year grade point averages, but more importantly, we find that highly impatient students respond more strongly to financial incentives than less impatient students. This finding suggests that financial incentives are most effective if they solve educational problems of myopic students.

Abstract

This paper investigates the effect of financial incentives on student performance and analyzes for the first time how the incentive effect in education is moderated by students’ risk and time preferences. To examine this interaction we use a natural experiment that we combine with data from surveys and economic experiments on risk and time preferences. We not only find that students who are offered financial incentives for better grades have on average better first- and second-year grade point averages, but more importantly, we find that highly impatient students respond more strongly to financial incentives than less impatient students. This finding suggests that financial incentives are most effective if they solve educational problems of myopic students.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:2012
Deposited On:13 Dec 2012 07:24
Last Modified:13 Aug 2017 15:04
Series Name:Swiss Leading House Working Paper
Official URL:http://www.isu.uzh.ch/leadinghouse/WorkingPapers/0079_lhwpaper.pdf
Related URLs:http://econpapers.repec.org/RePEc:iso:educat:0079
Other Identification Number:merlin-id:7465

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