Social Incentives in the Workplace

We present evidence on social incentives in the workplace, namely on whether workers’ behavioris affected by the presence of those they are socially tied to, even in settings where thereare no externalities among workers due to either the production technology or the compensationscheme in place. To do so we combine data on individual worker productivity from a firm’spersonnel records with information on each worker’s social network of friends in the firm. Wefind that compared to when she has no social ties with her co-workers, a given worker’s productivityis significantly higher when she works alongside friends who are more able than her, andsignificantly lower when she works with friends who are less able than her. As workers are paidpiece rates based on individual productivity, social incentives can be quantified in monetaryterms and are such that — (i) workers who are more able than their friends are willing to exertless effort and forgo 10% of their earnings; (ii) workers who have at least one friend who ismore able than themselves are willing to increase their effort and hence productivity by 10%.The distribution of worker ability is such that the net effect of social incentives on the firm’saggregate performance is positive. The results suggest that firms can exploit social incentivesas an alternative to monetary incentives to motivate workers.[...]