Financial Incentives and Educational Investment: The Impact of Performance-based Scholarships on Student Time Use

Abstract

We evaluate the effect of performance-based scholarship programs for postsecondary students on student time use and effort. We find evidence that financial incentives induced students to devote more time and effort to educational activities and allocate less time to other activities. Incentives did not generate impacts after eligibility ended and did not decrease students’ interest or enjoyment in learning. Evidence also suggests that students were motivated more by the incentives than simply the effect of additional money. A remaining puzzle is that larger scholarships did not generate larger responses in terms of effort.