The effect of financial rewards on students' achievement: Evidence from a randomized experiment

Edwin Leuven
Hessel Oosterbeek
Bas van der Klaauw

Journal of the European Economic Association 8, 1243-1265 (2010)

This paper reports on a randomized field experiment in which first-year university students could earn financial rewards for passing all first-year requirements within one year. Financial incentives turn out to have positive effects on achievement of high-ability students, whereas they have a negative impact on achievement of low-ability students. After three years these effects have increased, suggesting dynamic spillovers. The negative effects for less-able students are consistent with results from psychology and behavioral economics showing that external rewards may be detrimental for intrinsic motivation.

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Last updated: November 24, 2010.