Price Penalty and Financial Incentive Asymmetry in Program Take-Up
Program designers often assume that financial attendance bonuses and price reductions exert symmetric linear effects on program participation among low-income jobseekers.
Picture this
Charging a small entrance fee acts like a closed gate that deters people from joining, but offering a small cash gift to attend does not pull people through the door if they are already worried about non-monetary barriers like social embarrassment.
What the evidence says
Application rates decreased significantly when charging a price fee, but showed no statistically significant increase when offering a positive cash incentive relative to free enrollment.
- Who
- N = 1,460 unemployed/underemployed youth in Cairo, Egypt.
- How
- Randomized pricing cross-experiment varying program costs from a 200 EGP fee (~$25) to a cash stipend incentive (~$12.50) against a base program cost of 4500 EGP.
What to do
Allocate recruitment budgets toward mitigating non-monetary social frictions rather than funding cash attendance stipends once program fees are waived.
From the source
"We found that application rates decrease with price but do not increase with the incentive."
Stigma and Take-Up of Labor Market Assistance- Evidence from Three Experiments