Type: Seminar

When transparency fails: Financial incentives for local banking agents in Indonesia

Economic Development Seminar (EDS)

Speaker

Gianmarco León-Ciliotta (Universitat Pompeu Fabra)

Date & Time

Apr 22, 2021, 9:30-11:00 am EDT
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Location

This is a Virtual Event.

Abstract: We study the effect of raising the level and the transparency of financial incentives offered to local agents for acquiring clients of a new banking product on take-up. We find that paying agents higher incentives increases take-up, but only when the incentives are unknown to prospective clients. When disclosed, higher incentives instead have no effect on take-up, despite greater agent effort. This is explained by the financial incentives conveying a negative signal about the reliability and trustworthiness of the product and its providers to potential clients. In contexts with limited information about a new technology, financial incentives can thus affect technology adoption through both a supply-side effect (more agent effort) as well as a demand-side signaling effect (change in demand perceptions). Organizations designing incentive schemes should therefore pay close attention to both the level and the transparency of such incentives.

If you are interested in attending this seminar, please email fspp-ipc-questions@umich.edu