research

We examine the impact of incentives on intrinsic motivation after their removal. We follow up with parents three years after exposure to a bracelet incentive given to children upon timely vaccination in Sierra Leone. We leverage the design of an experiment under which clinics were randomly assigned to either offer incentives or not. Since only parents who had a newborn at the time were eligible, we also exploit individual variation in exposure within clinics. First, we find that eligibility to an incentive for an earlier child reduces parents' motivation to vaccinate their subsequent child on time, with decreases of 5 to 11 percent in the number of timely visits compared to unexposed parents. There are no impacts on vaccination rates by 15 months of age, suggesting parents delay vaccination, but do not abstain. Second, parents living in incentive communities who were ineligible at the time are unaffected, ruling out that results are driven by changes in community norms or clinic practices. Third, incentives that focus parents' attention on caring for their child's health do not lead to adverse effects. Together, our results suggest that incentives that shift parents' attention to an external reward, can crowd-out intrinsic motivation and negatively impact behaviors once removed.

This paper analyzes the extent to which digital technology attenuates the impact of exogenous shocks on small and medium-size enterprises (SMEs) in emerging markets. We leverage a proprietary dataset of over 40 million digitally-enabled card transactions from 28,000 SMEs in Cape Town, South Africa, from 2021 to 2024. Using a natural experiment of spatially segmented hourly rolling blackouts, together with real-time measurement, for identification we find an unequal impact among firms for additional outages in the short run. Surprisingly, baseline higher-performing firms benefit from increased digital sales during electricity outages. However, baseline lower-performing firms decrease sales, leading to higher exit rates amongst them in the long run. We find evidence that these results are driven by differential existing firm resources and business stealing. Our findings suggest that exogenous shocks in competitive environments disproportionately benefit higher-value firms because they are more resilient due to investment in higher-quality digital payment technology. This increases inequality in business performance via competitive business stealing. Its effect on income inequality and consumer welfare is an open question as consumers benefit from greater access to better firms and failed business owners may end up employed at these better firms as the economy expands.