GLRPPR: Sector Resources: Documents: A New Approach to an Age-Old Problem: Solving Externalities by Incenting Workers Directly
 
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GLRPPR Sector Resource: A New Approach to an Age-Old Problem: Solving Externalities by Incenting Workers Directly

Title:
A New Approach to an Age-Old Problem: Solving Externalities by Incenting Workers Directly

Abstract:
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 includes over 40,000 unique flights covering an eight-month period, we explore how information and incentives affect captains' performance. Making use of more than 110,000 captain-level observations, we find that our set of treatments--which include performance information, personal targets, and prosocial incentives--induces captains to improve efficiency in all three key flight areas: pre-flight, in-flight, and post-flight. We estimate that our treatments saved between 266,000-704,000 kg of fuel for the airline over the eight-month experimental period. These savings led to between 838,000-2.22 million kg of CO2 abated at a marginal abatement cost of negative $250 per ton of CO2 (i.e. a $250 savings per ton abated) 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.

URL:
http://www.nber.org/papers/w22316

Source:
National Bureau of Economic Research

Resource Type:
Article/report

Date of Publication:
June 2016

Associated Sectors:

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