Using Incentives to Using Incentives to Improve Outcomes:Improve Outcomes:

North-South Knowledge Sharing North-South Knowledge Sharing on Conditional Cash Transfer on Conditional Cash Transfer

ProgramsPrograms

Lawrence AberLawrence Aber

New York UniversityNew York UniversityLaura RawlingsLaura Rawlings

World BankWorld Bank

OutlineOutline

I.I. The Context: First generation The Context: First generation CCTs in the Global South/Latin CCTs in the Global South/Latin AmericaAmerica

New thinking on the role of welfare New thinking on the role of welfare reform.reform.

The place of CCTs in welfare reformThe place of CCTs in welfare reform

II.II. The focus: Second generation The focus: Second generation CCTs globally CCTs globally

Lessons and questionsLessons and questions Re-examining incentivesRe-examining incentives

Outline Outline (continued)(continued)III.III. The Social and Behavioral Science The Social and Behavioral Science

of Incentives:of Incentives: A. Empirical studies of financial A. Empirical studies of financial

incentives (incentives (not not holistic CCTs). holistic CCTs). Variations in Key Dimensions.Variations in Key Dimensions.

B. Theoretical perspectives on the B. Theoretical perspectives on the design and influence of financial design and influence of financial incentives.incentives.

Three Illustrations: Three Illustrations: (a) Psychology: Self-Determination Theory(a) Psychology: Self-Determination Theory

(b) Sociology: Social Capital, Social Control and (b) Sociology: Social Capital, Social Control and

Human Ecology TheoriesHuman Ecology Theories

(c) Behavioral Economics.(c) Behavioral Economics.

Outline Outline (continued)(continued)

IV.IV. Building tests of theory into Building tests of theory into evaluations of CCTs:evaluations of CCTs:

The Opportunity NYC/Family The Opportunity NYC/Family Rewards “Embedded” Study.Rewards “Embedded” Study.

I. I. Context: First Context: First generation CCTs generation CCTs

CCTs part of broader welfare reform CCTs part of broader welfare reform movementmovement Focus on households/demand sideFocus on households/demand side Use of incentivesUse of incentives Use of evaluationUse of evaluation Focus on building human capitalFocus on building human capital

Promising evaluation results on use of Promising evaluation results on use of social services, poverty reductionsocial services, poverty reduction

II. II. The Focus: Second The Focus: Second Generation CCTsGeneration CCTs

Questions left from first generation Questions left from first generation Are results replicable?Are results replicable? Graduation, labor market participation?Graduation, labor market participation? How to improve long-term outcomes?How to improve long-term outcomes?

Leads back to focus on incentives and Leads back to focus on incentives and howhow they are used they are used

Incentivize final outcomes?Incentivize final outcomes? Tailor incentives to populations/householdsTailor incentives to populations/households Menu of incentives?Menu of incentives?

Calls for a better understanding and Calls for a better understanding and testing/evaluation of how incentives worktesting/evaluation of how incentives work

III.A - Empirical Studies of III.A - Empirical Studies of Financial IncentivesFinancial Incentives

DomainsDomains• Health (11 studies and 2 meta-analyses)Health (11 studies and 2 meta-analyses)• Education (18 studies; 10 U.S. and 8 Education (18 studies; 10 U.S. and 8

International)International)• Work (12 studies)Work (12 studies)

Selection CriteriaSelection Criteria• Conditional financial incentive (NOT CCTs)Conditional financial incentive (NOT CCTs)• Primary focus on low-income populationPrimary focus on low-income population• Methodologically soundMethodologically sound• Published since 1991.Published since 1991.

FindingsFindings

HealthHealth -- incentives often effective in incentives often effective in promoting simple, short- promoting simple, short-

term term change change-- incentives sometimes incentives sometimes

effective in effective in promoting promoting complex, long term complex, long term change. change.

EducationEducation -- majority of U.S. and majority of U.S. and international international studies showed studies showed positive effects on positive effects on school school enrollment, attendance enrollment, attendance and academic progress (grades, and academic progress (grades,

grades completed, graduation). grades completed, graduation).-- virtually no evidence of virtually no evidence of

effects on effects on other outcomes. other outcomes.

Findings (continued)Findings (continued)

WorkWork -- Work incentives speed up Work incentives speed up employment but the boost is employment but the boost is temporary… controls catch up. temporary… controls catch up.

-- Work incentives increase Work incentives increase earnings and sometimes total earnings and sometimes total household income. household income.

-- Indirect effects on children? Indirect effects on children?

•• Positive for elementary-Positive for elementary-aged aged children! children!

•• Unclear for adolescents?Unclear for adolescents?

Variations in Key Variations in Key DimensionsDimensions

•• Nature of BehaviorNature of Behavior •• Nature of Nature of IncentivizedIncentivized Conditionality Conditionality

•• Nature of IncentiveNature of Incentive •• Additional Additional Supports/ Supports/

ServicesServices•• Target PopulationTarget Population •• Nature of the Nature of the

“Context” “Context”

III-B. Theoretical III-B. Theoretical Perspectives on the Design Perspectives on the Design and Influence of Financial and Influence of Financial

IncentivesIncentives

1.1. Psychological TheoriesPsychological Theories Self-Determinational Theory Self-Determinational Theory

(Deci)(Deci) Dynamic Skill Theory (Fischer)Dynamic Skill Theory (Fischer) Bio-Ecological Theory Bio-Ecological Theory

(Bronfenbrenner)(Bronfenbrenner) ““Stages of Change” TheoryStages of Change” Theory

Theoretical Perspectives Theoretical Perspectives (continued)(continued)

2.2. Sociological TheoriesSociological Theories Social Control Theory/Norms and Social Control Theory/Norms and

Behavioral ControlBehavioral Control Social Capital Social Capital

Theory/Relationships and Theory/Relationships and NetworksNetworks

Social Disorganization Social Disorganization Theory/Concentration and other Theory/Concentration and other effects.effects.

Theoretical Perspectives Theoretical Perspectives (continued)(continued)

3.3. Economic TheoriesEconomic Theories

Neo-Classical Economic Concepts: Neo-Classical Economic Concepts: Incentives…Incentives…

Reduce opportunity costs.Reduce opportunity costs. Improve clarity of systems messages Improve clarity of systems messages

about what is valuable.about what is valuable. Promote investments in human capitalPromote investments in human capital

Behavioral Economic Concepts:Behavioral Economic Concepts:

““The Choice Architecture”The Choice Architecture”

Illustrations of Theory-Illustrations of Theory-based Hypotheses and based Hypotheses and

ExplanationsExplanationsExample Example #1#1:: Paying children for Paying children for taking taking and passing and passing tests.tests.

Self-Determination Theory: Reliance Self-Determination Theory: Reliance on extrinsic rewards (like financial on extrinsic rewards (like financial incentives) will reduce intrinsic incentives) will reduce intrinsic motivation (in short run) and motivation (in short run) and academic achievement (in long run).academic achievement (in long run).

Early studies focused on Intrinsic Early studies focused on Intrinsic Motivation.Motivation.

1.1. Intrinsic motivation is associated Intrinsic motivation is associated with better learning, performance with better learning, performance and well-being.and well-being.

2.2. Extrinsic rewards (as well as threats, Extrinsic rewards (as well as threats, surveillance, evaluation and surveillance, evaluation and deadlines) undermine intrinsic deadlines) undermine intrinsic motivation.motivation.

3.3. Providing choice, acknowledging Providing choice, acknowledging people’s inner experiences, positive people’s inner experiences, positive feedback enhance intrinsic feedback enhance intrinsic motivation.motivation.

The Mediating Role of Basic Psychological The Mediating Role of Basic Psychological Needs: Competence, Autonomy, Needs: Competence, Autonomy, RelatednessRelatedness

More recent studies focus on fuller More recent studies focus on fuller consideration of extrinsic motivation: A consideration of extrinsic motivation: A continuum of types of regulation.continuum of types of regulation.

0.0. Non-regulation Non-regulation 3.3. Identified Identified Regulation Regulation

1.1. External External 4.4. Integrated Integrated Regulation Regulation Regulation Regulation

2.2. Introjected Introjected 5.5. Intrinsic Intrinsic RegulationRegulation Motivation Motivation

The Process of Internalization and The Process of Internalization and Integration of Extrinsic Motives Integration of Extrinsic Motives is:is:

• a natural developmental process, a natural developmental process, • but is strongly affected by the but is strongly affected by the

degree to which fulfillment of basic degree to which fulfillment of basic psychological needs is supported as psychological needs is supported as they engage in the relevant they engage in the relevant behavior.behavior.

Factors that facilitate Factors that facilitate internalization and integration of internalization and integration of extrinsic motives:extrinsic motives:

• Feelings of relatedness to socializing Feelings of relatedness to socializing others.others.

• Feelings of competence with respect Feelings of competence with respect to the regulation being internalized to the regulation being internalized (e.g. ability to grasp or understand (e.g. ability to grasp or understand the meaning or rationale behind the the meaning or rationale behind the regulation; ability to enact it).regulation; ability to enact it).

• An opportunity for the individual to An opportunity for the individual to freely process and endorse the freely process and endorse the transmitted value/regulation.transmitted value/regulation.

Factors affecting regulation of Factors affecting regulation of UNINTERESTING ACTIVITIES:UNINTERESTING ACTIVITIES:

• A meaningful rationale for why A meaningful rationale for why the target behavior is important.the target behavior is important.

• Acknowledgement that activities Acknowledgement that activities may not be intrinsically may not be intrinsically interesting.interesting.

• An emphasis on choice (feeling An emphasis on choice (feeling free to accept responsibility for free to accept responsibility for the behavior).the behavior).

Illustrations (continued)Illustrations (continued)

Example Example #2#2: Implementing a Financial : Implementing a Financial Incentive Experiment Incentive Experiment

•• for all eligible (via a place-for all eligible (via a place- randomized trial). randomized trial).

•• for selected individuals for selected individuals (via (via individual-randomized individual-randomized trial).trial).

Bio-ecological, Social Capital and Social Bio-ecological, Social Capital and Social Control Theories re: concentration and Control Theories re: concentration and peer effects.peer effects.

Illustrations (continued)Illustrations (continued)

Example Example #3#3: Building on insights from : Building on insights from behavioral economics in behavioral economics in designing next generation designing next generation CCTs CCTs (e.g. Amir et al., 2005; Bertrand (e.g. Amir et al., 2005; Bertrand

et al., 2006.et al., 2006.

1.1. Introduce CCTs via small discussion groups (vs. Introduce CCTs via small discussion groups (vs. individual interviews).individual interviews).

2.2. Reduce cognitive load and improve information Reduce cognitive load and improve information processing regarding incentives.processing regarding incentives.

Illustrations (continued)Illustrations (continued)

3.3. ““Prime the right identities” in Prime the right identities” in introducing CCTs to poor individuals introducing CCTs to poor individuals and sub-communities.and sub-communities.

4.4. Reduce the danger of killing intrinsic Reduce the danger of killing intrinsic motivation by framing CCTs in an motivation by framing CCTs in an autonomy promoting manner.autonomy promoting manner.

5.5. Communicate about CCTs in a Communicate about CCTs in a manner that conforms to people’s manner that conforms to people’s “mental accounting schemes”.“mental accounting schemes”.

Building tests of theory into evaluations of Building tests of theory into evaluations of CCTs: The ONYC/FR “Embedded Study”.CCTs: The ONYC/FR “Embedded Study”. Sub-study of Core Study.Sub-study of Core Study. Focus on only 1 of 3 age cohorts (due to Focus on only 1 of 3 age cohorts (due to

funding constraints) at 24 months.funding constraints) at 24 months. Proposals submitted to study all 3 age Proposals submitted to study all 3 age

cohorts at 48 months.cohorts at 48 months. Theory of Change and Measurement Theory of Change and Measurement

Strategy.Strategy. Current status; next steps.Current status; next steps.

Testing “competing” hypotheses about

“mechanisms of effect”

Incentives

behavioral engagement

academic performance

self-efficacy

behavioral compliance

extrinsic motivationintrinsic motivation

academic performance

Incentives

intrahousehold resource allocation

child (& parent) time use

Mediating Processes

Targeted & Non-targeted Outcomes

IV. Implications of Prior Studies and IV. Implications of Prior Studies and lack of Theory for Opportunity NYC lack of Theory for Opportunity NYC

(and other CCTs).(and other CCTs).

1.1. Where does ONYC fall among the Where does ONYC fall among the variations in fiscal incentive variations in fiscal incentive initiatives?initiatives?

2.2. What theories could be used to What theories could be used to continue to inform: the continue to inform: the evaluation of ONYC; the evaluation of ONYC; the interpretation of findings; the interpretation of findings; the redesign of future CCT redesign of future CCT initiatives in NYC?initiatives in NYC?

Implications (continued)Implications (continued)

3.3. What do politicians and program What do politicians and program executives need to know in executives need to know in designing incentive strategies?designing incentive strategies?

4.4. What do evaluators and What do evaluators and researchers need to know in researchers need to know in designing studies of incentive designing studies of incentive strategies?strategies?

5.5. How can funders promote How can funders promote implementation and cost-effective implementation and cost-effective studies to complement impact studies to complement impact studies?studies?

The Advantages of Greater The Advantages of Greater Attention to Social and Behavioral Attention to Social and Behavioral

Science Theory in Studies of Science Theory in Studies of Financial Incentives.Financial Incentives.

1.1. Easier to integrate and synthesize Easier to integrate and synthesize findings across studies.findings across studies.

2.2. Able to design tests of rival Able to design tests of rival explanations for results.explanations for results.

3.3. Knowledge from prior studies will Knowledge from prior studies will correlate more efficiently and correlate more efficiently and therefore inform future policy therefore inform future policy incentivesincentives more more powerfully.powerfully.