Christine L. Exley

Wage Elasticities in Working and Volunteering: The Role of Reference Points in a Laboratory Study

Volunteer behavior comprises a large source of both informal and formal labor in the United States, yet volunteer effort is often unresponsive to traditional incentives. To investigate the sources of this unresponsiveness, we appeal to a classic explanation: targeting behavior. In particular, we provide a laboratory test of effort response to changes in wages, either accrued to individuals or to a charity, in the presence of expectations-based reference points or targets. When individuals earn money for themselves, higher wages lead to higher effort with relatively muted targeting behavior. When individuals earn money for a charity, higher wages instead lead to lower effort with substantial targeting behavior. Results from an additional study highlight the potentially important role selection may play in this latter adverse response. For managers contemplating the use of performance goals or targets to encourage more volunteer effort, our results suggest careful consideration about the extent to which they may render other incentives less effective.

Observability Increases the Demand for Commitment Devices

Previous research often interprets the choice to restrict ones future opportunity set as evidence for sophisticated time-inconsistency. We propose an additional mechanism that may contribute to the demand for commitment technology: the desire to signal to others. We present a field experiment where participants can choose to give up money if they do not follow through with an action. When commitment choices are made public rather than kept private, we find significantly higher uptake rates.