Financial incentives as signals: experimental evidence from the recruitment of village promoters in Uganda

I study the role of financial incentives as signals of job characteristics when these are unknown to potential applicants. To this end, I create experimental variation in expected earnings and use that to estimate the effect of financial incentives on candidates’ perception of a brand-new health-promoter position in Uganda and on the resulting size and composition of the applicant pool. I find that more lucrative positions are perceived as entailing a lower positive externality for the commu- nity and discourage agents with strong prosocial preferences from applying. While higher financial incentives attract more applicants and increase the probability of filling a vacancy, the signal they convey reduces the ability to recruit the most socially motivated agents, who are found to stay longer on the job and to perform better.