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Monetary and promotion incentives in hyerarchical public organizations: experimental evidence from the community health worker program in Sierra Leone

Public economics

Senior Researcher : Gianmarco León-Ciliotta

Research Centre or Institution : Universitat Pompeu Fabra. Barcelona

Abstract

We study the effect of making an organization's promotion criteria more performance-based (i.e., more meritocratic), the effect of increasing the prize associated with a promotion (i.e., greater pay progression), and the interplay of both actions on worker productivity. In collaboration with a large public sector organization in Sierra Leone, we introduce exogenous variation at the team level in the extent to which the decision to promote an employee from a Community Health Worker (lower-tier) position to a Peer Supervisor (upper-tier) position is based on worker performance (rather than on personal connections). We cross-randomize this with variation in the perceived pay progression between these two positions. 

We find that greater meritocracy in the promotion system increases worker productivity, especially for workers who perceive the pay progression to be large and for those who are highly ranked in terms of performance. Higher pay progression can have differing effects in meritocratic and non-meritocratic systems. In the former, a steeper pay progression motivates lower-tier workers to climb the organization’s ladder and prompts an increase in their effort. Meanwhile, in non meritocratic promotion regimes, a steeper pay progression instead demotivates workers, lowering their productivity. The combination of steep pay progression and low meritocracy, commonly seen in the public and private sectors, may thus hinder the productivity of lower-tier workers.

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