A reassessment of the potential for loss-framed incentive contracts to increase productivity: a meta-analysis and a real-effort experiment

Abstract

Substantial productivity increases have been reported when incentives are framed as losses rather than gains. Loss-framed contracts have also been reported to be preferred by workers. The results from our meta-analysis and real-effort experiment challenge these claims. The meta-analysis’ summary effect size of loss framing is a 0.16 SD increase in productivity. Whereas the summary effect size in laboratory experiments is a 0.33 SD, the summary effect size from field experiments is 0.02 SD. We detect evidence of publication biases among laboratory experiments. In a new laboratory experiment that addresses prior design weaknesses, we estimate an effect size of 0.12 SD. This result, in combination with the meta-analysis, suggests that the difference between the effect size estimates in laboratory and field experiments does not stem from the limited external validity of laboratory experiments, but may instead stem from a mix of underpowered laboratory designs and publication biases. Moreover, in our experiment, most workers preferred the gain-framed contract and the increase in average productivity is only detectable in the subgroup of workers (~ 20%) who preferred the loss-framed contracts. Based on the results from our experiment and meta-analysis, we believe that behavioral scientists should better assess preferences for loss-framed contracts and the magnitude of their effects on productivity before advocating for greater use of such contracts among private and public sector actors.