Instituto de Economía

Abstract: The impact of performance pay in institutions with multiple goals depends on complementarities in the disutility cost of effort and how different task interact to achieve each goal. Workers of a microcredit-centered development institution were randomly assigned to one of two bonus schemes, each incentivizing one institutional goal: the performance of a microcredit program or social mobilization. We find that the credit bonus improved credit-related outcomes but it undermined the social outcome. In contrast, the social bonus advanced the social mission and the microcredit program but only for employees working alone, as it impacted negatively the performance of employees working in teams. These results cannot be explained through cost complementarity alone in the standard multitask principal-agent model, but instead suggestthat production complementarities are relevant.