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Replacing Trust with Control: A Field Test of Motivation Crowd Out Theory

Authors


  • We thank three anonymous referees, the editor and Per-Anders Edin, Ernst Fehr, Peter Fredriksson, John Ham, Per Johansson, Per Pettersson-Lidbom, Peter Skogman Thoursie and Jonas Vlachos for their comments. We also thank Carl-Johan Smedeby at Sida for an excellent collaboration and the representatives at Forum Syd, LO/TCO, The Olof Palme International Centre and the Swedish Mission Council for helpful remarks. Valuable research assistance was provided by Filippa Frisk, Karin Melldahl, Christopher Nordenlöw, Marcus Pettersson, Jonas Pålsson, Ida Viklund and Johan Wikström. Financial support from the Swedish Council for Working Life and Social Research (FAS: dnr 2007-0122) is gratefully acknowledged.

Abstract

Results in behavioural economics suggest that material incentives can crowd out motivation if agents are mission-oriented rather than self-interested. We test this prediction on a sample of non-profit organisations in Sweden. Traditionally, contracts with the main principal (the Swedish foreign aid agency) have been based on trust and self-regulation. We designed a randomised policy experiment, effectively replacing the trust-based contract with an increased level of monitoring from the principal. Overall, using both self-reported and observed measures of outreach, we find that the intervention increased outreach, reduced expenditures and reduced the number of financial irregularities.

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