Rady Professor Leads Team Studying Student Incentives

Educators have long debated the value of financial and other rewards as incentives, but a series of experiments in Chicago-area schools showed that with the right kind of rewards, student achievement improved by as much as six months beyond what would be expected.

Rady School of Management assistant professor Sally Sadoff was lead author for the research team that conducted a series of experiments involving 7,000 students in in Chicago-area elementary and high schools.

Researchers used financial rewards to boost performance for older students and non-financial rewards, such as trophies, to improve performance among younger students. The rewards apparently provide students with an incentive to take tests more seriously.

The prospect of losing a reward that was offered them before the test created a stronger desire to perform than the mere possibility of receiving a reward after a test, the research showed. Students who were given money or a trophy to look at while they tested performed better.

The research shows that test performance can improve dramatically if students are offered rewards just before they are given standardized tests and if they receive the incentive immediately afterward.

"Most importantly, all motivating power of the incentives vanishes when rewards are handed out with a delay," said Sadoff, who did the research as a Griffin Postdoctoral Scholar at the University of Chicago from 2010-11.

The team studied the impact of incentives on students taking relatively short, standardized diagnostic tests given three times a year to determine their grasp of mathematics and English skills. Unlike other tests on incentives, the students were not told ahead of time of the rewards so their study habits weren't impacted and the experiments could directly demonstrate the impact of the rewards themselves on performance.

The team found that elementary school students, who were given nonfinancial rewards, responded more to incentives than students in high school. Those students were given trophies, as they have been found to be more responsive to non-monetary rewards than older students. Among high school students, the amount of money involved in the incentive mattered. Students performed better if offered $20 than they did if offered $10.

"At Bloom Township High School, when we offered students $20 incentives, we found that their scores were 0.12 to .20 standard deviation points (five to sixth months in improved performance) above what we would otherwise have predicted given their previous test scores," Sadoff said.

Sadoff was joined in her work by John List, the Homer J. Livingston Professor in Economics and one of the nation's leading scholars of experimental economics; Steven Levitt, the William B. Ogden Distinguished Service Professor in Economics at University of Chicago; and Susanne Neckermann, a scholar at the Center for European Economic Research in Germany.

List pointed out that the results of the experiments challenged a conventional theory that giving students tangible rewards "crowds out intrinsic motivation, rendering such approaches ineffective in the short run and potentially detrimental in the long run."

The students tested had low initial motivation to do well, and thus benefited from the rewards, List said. He added that follow-up tests showed no negative impact on removing the rewards in successive tests.

The research helps teachers and school leaders better understand the role of rewards in school performance. Most rewards are delayed and involve a very distant horizon, such as the prospect of making a better salary as an adult as the result of better school performance, the team pointed out.

"The effect of timing of payoffs provides insights into the crux of the education problem that we face with our urban youth," the authors write. "Effort is far removed from the payout of rewards, making it difficult for students to connect them in a useful way. The failure to recognize this connection potentially leads to dramatic under-investment," as students fail to apply themselves and policymakers don't realize the students' full potential.

The research was reported in the paper, "The Behaviorist Goes to School: Leveraging Behavioral Economics to Improve Educational Performance," published by the National Bureau of Economic Research.

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