Do cash incentives work?

Andreas Ortmann
3 min readAug 3, 2021

So, it seems that Albo finally managed to cut through: his $300 cash payment proposal dominated the news cycle yesterday. What’s the evidence that it works?

There is considerable evidence that cash payments work and are more effective than lotteries in experimental situations. That cash payments are a better incentive than lotteries (or random payment, aka lotteries) is also in line with results from experimental economics. And they may well be an excellent means to get important subpopulations (e.g., the young essential workers in the eight LGAs that have been put under harsher lockdown conditions by the Berejiklian government) to get vaxxed. But it does pose the interesting questions that were asked yesterday: What about those that already have been vaxxed (me! me!) and those who are/were willing to get vaxxed: Might it drive out the intrinsic motivation to do good and contribute to the public good? This is an age-old question in the literature and the evidence is much harder to assess.

While lotteries are inferior to cash payments in experimental situations, lotteries have a well-established record of getting people to take up public-health suggestions (and to address the negative spillover effects that come with infectious diseases) without running into danger of driving out intrinsic motivation. A recent United Airlines lottery also has been a smashing success.

While a recent study has suggested that lotteries are ineffective there are obvious problems with the study (it is based on time-series data and controls very poorly for the counterfactual, and seems to ignore that the state of vaccination varies wildly across the USA which provides potential for various confounds. Based on this one study, it seems not a good idea to get rid of a well-established public health intervention.

There are of course other high-powered incentives that could be used: privileges such as being able to travel again in less unrestricted ways. That’d be quite the carrot for many. And it would allow, finally, … Aussies stranded abroad to re-unite with family, friends, and lovers. In fact, it should be something implemented right away since it is extremely low risk.

High-powered incentives to travel to and fro the lucky country won’t be enough. Not everyone travels, or for that matter has the funds to travel. So, what about those others? Access to local activities could be similarly incentivized and in fact the National Cabinet has already decided that something like that will happen: Imagine access to stadiums, or other sporting events, markets, bazaars, clubs, and even cafes/restaurants were configured in ways that required successful vaccination. That would be quite the stick, or carrot (dependent on how you look at it), for many. Relatedly, there is some evidence that vax badges on dating apps are very promising. All of these strategies give more freedom for the vaccinated while maintaining some restrictions for the unvaccinated. There are no doubt important ethical issues here but, as Hicks & Dore have pointed out, they have been successfully addressed elsewhere (e.g., in Germany and France). I have discussed some of these issues in my earlier post on vaccination hesitancy.

Of course, before all these strategies become really relevant it would be useful to get the messaging straight (to address vaccine hesitancy currently directed at the AZ vaccine) and to actually have an excess demand for vaccines (which then would really need us to address vaccination hesitancy). And it would help to make the booking of vaccination appointments easy and painless. It is not right now.



Andreas Ortmann

EconProf: I post occasionally on whatever tickles my fancy: Science, evidence production, the Econ tribe, Oz politics, etc. Y’all r entitled to my opinions …