Thursday, 4 August 2011

Incentives matter: blood file

In an article from Joan Costa-i-Font, Mireia Jofre-Bonet and Steven Yen argue that paying some people to donate blood while others receive a cursory “thanks” has been shown to crowd out the altruistic donors. They write,
Individuals might undertake certain altruistic actions guided by an extrinsic motivation, including a “warm-glow” or moral satisfaction. Trying to answer the question of whether altruistic behaviour can be incentivised, in recent research (Costa-Font et al. 2011) we investigate whether different financial and non-financial incentives have the same effect on willingness to donate when other observed and unobserved factors are controlled for. In particular, we investigate whether crowding-out takes place with all kinds of rewards, or specifically with only monetary rewards. We answer this question by exploiting a large data set representative of 15 European countries containing information on whether or not an individual has been a donor in the past and her preferences towards monetary and non-monetary compensation for blood donation. This information allows estimation of two recursive equation systems and exploration of the relationship of preferences over different types of rewards and the probability of being a donor.

Importantly, we find that a monetary reward reduced the probability of donation consistent with the crowding out hypothesis, whilst a non-monetary reward consistently with a normal supply curve suggests a positive and significant effect on the donation probability.

These results are robust to different specifications and indicate that crowding out is a phenomenon linked to the introduction of a market-based rationale for non-market decisions, and that socially motivated individuals remain willing to donate when non-monetary rewards are offered.
Non-monetary rewards could potentially be used to incentivise blood donation as this kind of rewards seem not to remove, in the terminology of Andreoni et al. (2008), the warm-glow associated to blood giving.
So incentives matter, but the form the incentive takes may also matter.

But on blood donations and incentives compare the above with this study: Will There Be Blood? Incentives and Substitution Effects in Pro-social Behavior by Nicola Lacetera, Mario Macis and Robert Slonim, Discussion Paper No. 4567, November 2009, Institute for the Study of Labor. The abstract of the paper reads:
We examine how economic incentives affect pro-social behavior through the analysis of a unique dataset with information on more than 14,000 American Red Cross blood drives. Our findings are consistent with blood donors responding to incentives in a “standard” way; offering donors economic incentives significantly increases turnout and blood units collected, and more so the greater the incentive’s monetary value. In addition, there is no disproportionate increase in donors who come to a drive but are ineligible to donate when incentives are offered. Further evidence from a small-scale field experiment corroborates these findings and confirms that donors are motivated by the economic value of the items offered. We also find that a substantial fraction of the increase in donations due to incentives may be explained by donors substituting away from neighboring drives toward drives where rewards are offered, and the likelihood of this substitution is higher the higher the monetary value of the incentive offered and if neighboring drives do not offer incentives. Thus, extrinsic incentives motivate pro-social behavior, but unless substitution effects are also considered, the effect of incentives may be overestimated.
  • Andreoni, J, WT Harbaugh, L Vesterlund (2008), “Altruism in experiments”, in SN Durlauf and LE Blume (eds.), The New Palgrave Dictionary of Economics, 2nd Edition, Palgrave Macmillan, 134-138.
  • Costa-Font, Joan, Mireia Jofre-Bonet, Steven T Yen (2011), “Not All Incentives Wash Out the Warm Glow: The Case of Blood Donation Revisited”, CESifo Working Paper No. 3527.

No comments: