We study whether poverty can induce affective states that decrease productivity. In a controlled laboratory setting, we find that subjects randomly assigned to a treatment, in which they view a video featuring individuals that live in extreme poverty, exhibit lower subsequent productivity compared to subjects assigned to a control treatment. Questionnaire responses, as well as facial recognition software, provide quantitative measures of the affective state evoked by the two treatments. Subjects exposed to images of poverty experience a more negative affective state than those in the control treatment. Further analyses show that individuals in a more positive emotional state exhibit less of a treatment effect. Also, those who exhibit greater attentiveness upon viewing the poverty video are less productive. The results are consistent with the notion that exposure to poverty can induce a psychological state in individuals that adversely affects productivity.

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Working Papers

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To boost employees’ performance, firms often offer monetary bonuses when production goals are reached. However, the available evidence indicates that the particular level at which a goal is set is critical to the effectiveness of this practice. Goals must be challenging yet achievable. Computing optimal goals when employees have private information about their own abilities may be impossible for an employer. To solve this problem, we propose a compensation scheme, in which workers set their own production goals and bonuses. We provide a simple model of self-chosen goals and test its predictions in the laboratory. The model predicts that (a) the self-chosen goal contract is more cost effective than a piece rate contract for an employer interested in attaining a desired level of output, and that (b) workers set goals that they systematically outperform. Our experimental data support both predictions. We also observe sharp gender differences in the experiment. The self-chosen goal contract increases the performance of men but not of women relative to a piece rate contract. Women set lower goals, but outperform them to a greater extent than men.

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  • “Social Status and Performance: Theory and Evidence”CentER Discussion Paper Series No. 2016-032.

This paper investigates the causal effect of social status on performance. I propose that this relationship takes place through a psychological mechanism: status shapes an individual’s beliefs about her performance abilities and these beliefs are fulfilled. A theoretical framework serves two purposes. First, it provides the conditions over the preferences and the belief formation of the agent that guarantees the existence of such effect. Second, it predicts that social status will generate performance differences among the low ability individuals, but not for high ability individuals. Low ability individuals keep up with or lag behind the rest of the agents when assigned the high or low status, respectively. Data from two experiments corroborate these predictions. I also observe that the randomly assigned status treatments lead to differences in performance beliefs among the low ability participants, but not for the high ability participants. This suggests that social status induces self-fulfilling beliefs for the less skilled individuals.

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Work in Progress

  • “An incentive scheme using probability weighting functions”
The aim of this paper is to evaluate the efficiency of a novel incentive scheme tailored to exploit an individual’s systematical distortion of probabilities. The scheme complements a standard performance-pay incentive with a random component, which specifies the proportion of the production that will be taken into account to evaluate performance.  The principal’s objective is to set this component such that the agent’s perception of probabilities is diverted, which in turn  induces higher performance outcomes. I find the optimal contract within this menu of contracts, and  compare the proposed scheme to a standard piecerate scheme.
Status: Data Collection. 

Status: Experimental design

Status: Experimental design