The Effectiveness and Legitimacy of Material Incentives in Labor Contracts: An International Comparative Experiment

This international research project uses a combination of online survey and online experiment to test whether different material incentives for wage workers vary in legitimacy and effectiveness across countries. The experiment is played in three countries across three continents. The policy objective of the research is to identify better ways of preparing entrepreneurs to operate in other cultures, thereby fostering international growth and the spread of innovation to less developed countries. We test five main hypotheses: (1) do individuals and countries differ in which incentive mechanisms they regard as legitimate in employment contracts; (2) do workers respond more positively to incentives that they or their culture regard as legitimate; (3) do beliefs about the effectiveness of different material incentives correlate positively with perceptions about incentive legitimacy at the individual or country level; (4) are employers and managers more willing to use incentives that they believe to be effective or legitimate in their culture; and (5) do mismatched legitimacy norms across cultures lead to negative stereotypes. We also document how subjects from one country react to employers and managers from another, and whether subjects from one country are able to motivate workers in another. To do this, we have assembled a strong team from three top universities with a lot of combined experience running experiments in other countries, online and in the lab.