Description:

Erika Deserranno (Northwestern University): "Meritocratic Promotions and Worker Productivity: An Experiment in the Public Sector" (joint work with Gianmarco Leon and Philipp Kastrau)

Abstract: We study the effect of making the promotion criteria in an organization more performance-based (i.e., more meritocratic), the effect of increasing the prize associated with a promotion (i.e., more pay progression), and the interplay of the two on worker productivity. In collaboration with a large public sector organization in Sierra Leone, we introduce exogenous variation at the team level in the extent to which the promotion decision from a Community Health Worker (lower-tier) position to a Peer Supervisor (upper-tier) position is based on worker performance (rather than on personal connections). We cross-randomize this with variation in the perceived pay progression between these two positions. We find that more meritocracy in the promotion system increases worker productivity, especially for workers who perceive the pay progression to be large and for those who are highly-ranked in terms of performance. Higher pay progression has opposite effects depending on meritocracy. In meritocratic promotion regimes, a steeper pay progression motivates lower-tier workers to “climb the organization’s ladder” and prompts an increase in their effort. In non-meritocratic promotion regimes, a steeper pay progression instead demotivates workers, lowering their productivity. The combination of steep pay progression and low meritocracy that is the norm in many bureaucracies in developing countries and in multiple private sector firms around the world may thus hinder the productivity of lower-tier workers.