Financial Incentives, Efforts, and Performances in the Health Sector: Experimental Evidence from the Democratic Republic of Congo

Abstract

Financial incentives for service providers are increasingly used in developing countries as a tool to maximize the effort and output of public providers. Using a field experiment in the Democratic Republic of Congo, we evaluate the impact of a fee-for-service mechanism aimed to increase health service utilization. We find that relative to fixed payments, the fee-for-service mechanism slightly decreased service utilization. We show that these detrimental effects of incentives do not result from a diminution in workers’ efforts, fraud, or switching away from nonincentivized actions. But workers’ intrinsic motivation decreased and their efforts were evidently misplaced, showing that incentivized workers are not always more productive because they may not understand how to perform.