Toward an Understanding of the Welfare Effects of Nudges: Evidence from a Field Experiment in Uganda

Social scientists have recently explored how framing of gains and losses affects productivity. We conducted a field experiment in peri-urban Uganda, and compare output levels across 1000 workers over isomorphic tasks and incentives, framed as either losses or gains. We find that loss aversion can be leveraged to increase the productivity of labor. The estimated welfare costs of using the loss contract are quite modest – perhaps because the loss contract is viewed as a (soft) commitment device.