Financing mechanisms may displace ethical motivations. An experiment on the effects for the production of social welfare goods.

Marco Faillo (University of Trento)
Virginia Cecchini Manara (University of Milan)
Lorenzo Sacconi (University of Milan)
Klaudijo Klaser (University of Trento)

Abstract

This paper investigates the complex interplay between motivations and financial incentives in the provision of social welfare goods. Drawing on an experimental study, we examine how the availability of funds and the metrics used to evaluate performance influence the behavior of workers involved in the production process, with a specific focus on imperfect proxies. Our findings reveal that pro-social motivations in welfare production are not only affected by direct incentives targeting workers’ remuneration based on performance metrics, but also by the broader institutional setting. Notably, we caution against the potential consequences of implementing contractual mechanisms aimed at financing social welfare service production through speculative finance. Although these mechanisms are conditioned on meeting social impact objectives, they can alter workers’ preferences and impede the pursuit of broader social welfare goals. Additionally, our study sheds light on the coherence, or lack thereof, between financing mechanisms and organizational structures and goals. This contributes to a deeper understanding of the intricate relationship between financial incentives and social welfare provision.

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