WP-027:Greer K. Gosnell, John A. List, and Robert D. Metcalf, "A New Approach to an Age-Old Problem: Solving Externalities by Incenting Workers Directly" (January 2017)
Understanding motivations in the workplace remains of utmost import as economies around the world rely on increases in labor productivity to foster sustainable economic growth. We created a unique opportunity in partnering with Virgin Atlantic Airways to test a role for monitoring, performance information, personal targets, and prosocial incentives on fuel efficiency of their captains. We found that monitoring and targets induce captains to improve efficiency in all three key flight areas: pre-flight, in-flight, and post-flight. Our study provided the lowest calculated marginal abatement cost per ton of CO2, at negative $250 (i.e., $250 savings per ton abated). Methodologically, our approach has implications for climate policy and suggests a new way to combat firm-level externalities: target workers rather than the firm as a whole.