Motivation Crowding Theory

TLDR

The Motivation Crowding Effect posits that monetary incentives or punishments can either undermine or strengthen intrinsic motivation, a theoretical issue that has dominated economic debate and is supported by numerous empirical studies across diverse contexts. The study aims to demonstrate the empirical relevance of the Motivation Crowding Effect. The authors compile circumstantial, laboratory, and field evidence from psychologists, economists, and econometric studies across multiple countries and time periods. The findings confirm that crowding effects are empirically relevant and can, in specific cases, outweigh the traditional relative price effect.

Abstract

The Motivation Crowding Effect suggests that external intervention via monetary incentives or punishments may undermine, and under different identifiable conditions strengthen, intrinsic motivation. As of today, the theoretical possibility of motivation crowding has been the main subject of discussion among economists. This study demonstrates that the effect is also of empirical relevance . There exist a large number of studies, offering empirical evidence in support of the existence of crowding–out and crowding–in. The study is based on circumstantial evidence, laboratory studies by both psychologists and economists, as well as field research by econometric studies. The pieces of evidence presented refer to a wide variety of areas of the economy and society and have been collected for many different countries and periods of time. Crowding effects thus are an empirically relevant phenomenon, which can, in specific cases, even dominate the traditional relative price effect.