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Different Strokes for Different Folks? Experimental Evidence on the Effectiveness of Input and Output Incentive Contracts for Health Care Providers with Varying Skills†

Different Strokes for Different Folks? Experimental Evidence on the Effectiveness of Input and... AbstractA central issue in designing incentive contracts is the decision to reward agents’ input use versus outputs. The trade-off between risk and return to innovation in production can also lead agents with varying skill levels to perform differentially under different contracts. We study this issue experimentally, observing and verifying inputs and outputs in Indian maternity care. We find that both contract types achieve comparable reductions in postpartum hemorrhage rates, but payments for outputs were four times that of inputs. Providers with varying qualifications performed equivalently under input incentives, while providers with advanced qualifications may have performed better under output contracts. (JEL D82, D86, I12, J13, J16, J41, O15) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal Applied Economics American Economic Association

Different Strokes for Different Folks? Experimental Evidence on the Effectiveness of Input and Output Incentive Contracts for Health Care Providers with Varying Skills†

Different Strokes for Different Folks? Experimental Evidence on the Effectiveness of Input and Output Incentive Contracts for Health Care Providers with Varying Skills†

American Economic Journal: Applied Economics 2021, 13(4): 34–69 https://doi.org/10.1257/app.20190220 Different Strokes for Different Folks? Experimental Evidence on the Effectiveness of Input and Output Incentive Contracts for Health Care Providers with Varying Skills By Manoj Mohanan, Katherine Donato, Grant Miller, Yulya Truskinovsky, and Marcos Vera-Hernández* A central issue in designing incentive contracts is the decision to reward agents’ input use versus outputs. The tr ade-off between risk and return to innovation in production can also lead agents with varying skill levels to perform differentially under different con- tracts. We study this issue experimentally, observing and verify- ing inputs and outputs in Indian maternity care. We find that both contract types achieve comparable reductions in postpartum hem - orrhage rates, but payments for outputs were four times that of inputs. Providers with varying qualifications performed equiv- alently under input incentives, while providers with advanced qualifications may have performed better under output contracts. (JEL D82, D86, I12, J13, J16, J41, O15) erformance incentives have long been used to correct a range of principal-agent problems (Jensen and Murphy 1990, Hall and Liebman 1998, Lazear 2000, Roland 2004, Rosenthal et al. 2004 ). A central issue in the design of performance * Mohanan: Sanford School of Public Policy, Duke University (manoj.mohanan@duke.edu); Donato: Boston Consulting Group (donatoke@gmail.com); Miller: Stanford University and NBER (ngmiller@stanford.edu); Truskinovsky: Department of Economics, Wayne State Univ(ersity yulya.truskinovsky@wayne.edu); Vera- Hernández: Department of Economics, University College London and IFS (m.vera@ucl.ac.uk). Donato, Miller, Truskinovsky, and Vera-Hernandez contributed equally to the manuscript. Neale Mahoney was coeditor for this article. This research was made possible by funding and support from 3ie and DFID-India (OW2:...
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References (80)

Publisher
American Economic Association
Copyright
Copyright © 2021 © American Economic Association
ISSN
1945-7790
DOI
10.1257/app.20190220
Publisher site
See Article on Publisher Site

Abstract

AbstractA central issue in designing incentive contracts is the decision to reward agents’ input use versus outputs. The trade-off between risk and return to innovation in production can also lead agents with varying skill levels to perform differentially under different contracts. We study this issue experimentally, observing and verifying inputs and outputs in Indian maternity care. We find that both contract types achieve comparable reductions in postpartum hemorrhage rates, but payments for outputs were four times that of inputs. Providers with varying qualifications performed equivalently under input incentives, while providers with advanced qualifications may have performed better under output contracts. (JEL D82, D86, I12, J13, J16, J41, O15)

Journal

American Economic Journal Applied EconomicsAmerican Economic Association

Published: Oct 1, 2021

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