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Can Bureaucrats Really be Paid like CEOs? Substitution Between Incentives and Resources Among School Administrators in China
Journal Article

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Journal of the European Economic Association

February, 2019

Unlike performance incentives for private sector managers, little is known about performance incentives for managers in public sector bureaucracies. Through a randomized trial in rural China, we study performance incentives rewarding school administrators for reducing student anemia -- as well as complementarity between incentives and orthogonally assigned discretionary resources. Large (but not small) incentives and unrestricted grants both reduced anemia, but incentives were more cost-effective. Although unrestricted grants and small incentives do not interact, grants fully crowd-out the effect of larger incentives. Our findings suggest that performance incentives can be effective in bureaucratic environments, but they are not complementary to discretionary resources. 

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