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.

Scaling for Economists: Lessons from the Non-Adherence Problem in the Medical Literature

“…Notably, some clinicians have successfully used financial incentives to encourage general healthy behavior, such as smoking cessation (Halpern et al 2015) and weight loss (Volpp et al 2008).…”

Tailored Feedback and Worker Green Behavior: Field Evidence from Bus Drivers

“…The link between fuel usage and production costs suggests that these incentives could create a win-win scenario for the environment and the firm (Gosnell, List and Metcalfe 2016).…”

“…One study reports fuel savings when airline captains are provided with tailored feedback (Gosnell et al 2016). Other work finds that the provision of social-comparison information in plants with (without) a teamwork culture leads to decreased (improved) truck driver performance (Blader, Gartenberg and Prat 2016).…”

“…While there has been much progress in our understanding of non-financial incentives in residential energy consumption, more research is needed to explore the extent to which these insights generalize to firms (Gerarden, Newell and Stavins forthcoming, Gosnell et al 2016). Our work aims to fill this gap by evaluating the immediate and delayed (interaction) effects of two tailored feedback programs on the driving behavior of bus drivers.…”

“…Tailoring feedback to disaggregate productivity measures can be a cost-effective means to improve conservation efforts among workers (Gosnell et al 2016). It may empower poor performers by increasing the feeling of control, raising awareness of behaviors that require attention, and by offering suggestions for specific actions that workers can take.…”