Financial Incentives in Multi-Layered Organisations: An Experiment in the Public Sector

Empirical Evidence from the Community Health Worker Program in Sierra Leone

Authors: 

Erika Deserranno, Northwestern University, and Philipp Kastrau and Gianmarco León-Ciliotta, Universitat Pompeu Fabra

Introduction: 

Poor performance of frontline service providers (e.g., teachers, health workers, tax collectors) has generated a large push towards pay-for-performance schemes, especially in developing countries. These schemes have been extensively evaluated, showing promising results (e.g.,Basinga et al. (2011a); Gertler & Vermeersch (2013); Miller & Babiarz (2013); De Walque et al. (2013); Singh & Mitra (2017)). However, the literature mostly ignores the fact that frontline service providers work in multi-layered organizations (Tirole (1986, 1992); Gibbons(1996); Holmstrom (2017)) and incentivizing them can have positive or negative spillover effects on layers above them. Moreover, any organization that is resource constrained – as it is often the case in developing countries – must decide how to allocate pay across the different layers, and raising incentives for the lower tier may entail reducing incentives at the upper tier. This points to the importance of studying incentives in the organization as a whole rather than focusing on one layer only. This project aims to provide the first empirical evidence of financial incentives at different layers of a large public organization, namely the community health worker program in Sierra Leone.