Date: March 30, 2023 (12:30 pm-1:30 pm)

Speaker: Anne Karing (University of Chicago)

Paper Title: “Optimal Incentives in the Presence of Social Norms: Experimental Evidence from Kenya” with  Edward Jee and Karim Naguib.

Abstract: Economic theory suggests that reputational incentives can interact with economic incentives, mitigating or amplifying their effects. We use a large-scale field experiment and a structural model to examine these interactions in the context of a new community deworming program in Kenya. We vary both the economic cost of deworming and its visibility by randomly assigning communities to either close or far distances from points of treatment (PoTs) and by implementing two signaling incentives – a colored bracelet and ink on the thumb – which adults receive when coming for treatment. The bracelets and ink allow adults to signal that they contributed to protecting their community from worms. Our reduced form estimates show that, in the absence of incentives, a 1km increase in distance reduces take-up from 41 to 26%. Bracelets significantly increase the take-up of deworming, with effects twice as large for far communities (10.7pp) compared to close communities (4.8pp). Conversely, a private incentive of similar consumption value to the bracelet has a small and constant effect on take-up (1.8pp). Next, we estimate a structural social signaling model that mirrors Benabou and Tirole’s (2012) theoretical framework, and explicitly model the private benefits of incentives, the visibility of actions and associated reputational returns. Consistent with the theory’s predictions, we find that reputational returns increase as the cost of deworming increases, and that higher reputational returns mitigate the negative impact of distance on deworming take-up (a social multiplier greater than -1). Finally, we use our parameter estimates to solve for the optimal allocation of PoTs and show that, by accounting for these interactions, locations can be set up further apart, and the program can expanded to a larger population. Our findings suggest that experimentation at scale is crucial for governments to learn about interactions between economic and reputational incentives and leverage them for optimal policy design.