MONETARY INCENTIVES AND STUDENT ACHIEVEMENT IN A DEPRESSED LABOUR MARKET: RESULTS FROM A RANDOMIZED EXPERIMENT

In this paper we carry out an evaluation of the effectiveness of monetary incentives in enhancing student performance using a randomized experiment involving undergraduate students enrolled at a Southern Italian University. Students participating at the experiment were assigned to three different groups: a high reward group, a low reward group and a control group. Rewards were assigned following a tournament rule to the 30 best performing students in each treated group. Findings suggest that financial rewards increase student performance both in terms of number of credits earned and grades obtained at exams. High ability students react strongly while the effect is null for low ability students. When the “intention-to-treat” effects are adjusted for non-participation using IV, it emerges a stronger impact of the treatment on student performance.