DP11751 Killer Incentives: Status Competition and Pilot Performance during World War II

Author(s): Philipp Ager, Leonardo Bursztyn, Hans-Joachim Voth
Publication Date: January 2017
Keyword(s): Behavioral economics, Employee motivation, Nonfinancial incentives, Status competition, World War II
JEL(s): J24, J32, M52, N44
Programme Areas: Labour Economics, Economic History
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11751

A growing theoretical and empirical literature shows that public recognition can lead to greater effort amongst employees. At the same time, status competition can be associated with excessive expenditure on status goods, higher risk of bankruptcy, and more risk taking amongst money managers. In this paper, we look at the effects of recognition and status competition jointly: We focus on the spillover effects of public recognition on the performance and risk taking of peers. Using newly collected data on monthly victory scores of over 5,000 German pilots during World War II, we find corrosive effects of status competition: When the daily bulletin of the German armed forces mentioned the accomplishments of a particular fighter pilot, his former peers perform markedly better. Outperformance is differential across skill groups. When a former squadron peer is mentioned, the best pilots try harder, score more, and die no more frequently; average pilots win only a few additional victories, but die at a markedly higher rate. Our results suggest that the overall efficiency effects of non-financial rewards can be ambiguous in settings where both risk and output affect aggregate performance.