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June 03, 2016

Incentives for prosocial activities—Do they work?

Millions of people volunteer their time to help the elderly, serve in soup kitchens, donate blood, clean beaches, and so on. Without the contribution of these individuals, many public goods and services would not be provided. Estimates indicate, for example, that the economic value of volunteer time in a year is about $180 billion in the US, and $100 billion in Germany. These figures say a lot about the importance of these activities, and also about the motives and nature of a large population, in particular their will to help others even if not remunerated for doing so. The same can be said about those who engage in professions in which a vocation or “call” is particularly important—think of physicians and paramedics joining Doctors Without Borders, or teachers generally around the world.

Yet, the provision of these activities often does not meet societal needs—blood shortages are frequent, and so is the availability of volunteer work for many other prosocial tasks. As we learn from basic economics, there is a simple method that would likely increase supply: providing economic incentives. However, there has long been an aversion to providing rewards to volunteers. Blood donation is an interesting example. The social scientist Richard Titmuss claimed in the early 1970s that offering rewards to blood donors would attract individuals who were more likely to carry diseases or to engage in behaviors that would lead to infectious diseases; moreover, the provision of rewards per se would reduce the “intrinsic” altruistic motives that donors have, thus offsetting any power of the material rewards. Although, initially, survey evidence on the attitudes toward donating blood was consistent with these hypotheses, more recent studies from several countries and contexts—based on large representative samples, the observation of actual donation decisions rather than just attitudes, and research methodologies that include randomized controlled trials—have provided clear evidence that concerns about the drawbacks of incentives are not borne out in the data. Incentives of various types, from gift cards to lottery tickets to paid time off work, do bring more people to donate blood, with no impact on the “quality” of donors, as expressed by their eligibility to donate. Indeed, the evidence now shows that economic incentives enhance other forms of prosocial activity, such as eco-friendly behavior, as well as the attractiveness and quality of jobs with strong intrinsic and other-regarding motives, such as the civil service, teaching, and health-related activities.

These findings also raise additional questions about which more evidence is needed. First, we need to better understand whether offering rewards for an activity increases overall volunteering, or if a “local” increase, for example at a given blood drive at a given time, comes at the expense of a decrease at other places and locations where incentives may not be offered (a substitution or displacement effect). The same effects need to be explored between activities; does rewarding blood donation reduce the time that people spend helping in other ways? In contrast, may the provision of incentives increase the attention given to and relevance of an activity, thus leading to an overall increase in provision because of greater awareness and regardless of the provision of incentives (a “social spillover” effect)?

A second question is whether there are limits to the provision of incentives, beyond which individuals and societies may feel morally uncomfortable. Research informs us that there is a moral “repugnance” toward providing economic rewards for certain activities; even if the evidence tells us that incentives enhance blood donation, do we consider it “ethical” to provide these incentives? Would we feel the same way with regard to compensating, for example, egg, sperm, or kidney donors? A number of researchers, including myself, are currently busy trying to address these questions, and hopefully more will join this important endeavor.

Taken together and considering these two questions as well, the convincing evidence of the positive effects of incentives provides a powerful yet relatively simple tool for enhancing prosocial behavior; organizations and agencies active in the promotion of prosocial services should therefore consider providing explicit rewards to their volunteers.

See Nicola Lacetera, “Incentives for prosocial activities,” for more information.

Please note:
We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.