Does the allocation of incentives across the hierarchy of an organization matter for its performance? In an experiment with a large public health organization, we find that health care provision is highly affected by how incentives are allocated between frontline workers and their supervisors. Sharing incentives equally between these two layers raises health visits by 61% compared with unilateral allocations and uniquely improves health service provision and health outcomes. We provide reduced-form and structural evidence that effort complementarities and contractual frictions drive these results and explore the implications for the optimal design of incentive policies in multilayered organizations.

Does low trust in workers discourage firms from hiring? We conduct an experiment in Ghana with real entrepreneurs who have the option to hire anonymous workers for a trivial but tedious task. Shirking attracts no penalty and completion of the task is an indicator of trustworthiness. We elicit employers’ expectations and study how they change with random signals of workers’ previous behavior. We find that employers underestimate workers’ trustworthiness, which reduces hiring and profits. Negative signals lower employers’ expectations, while positive signals do not affect them. This asymmetry can help to sustain an equilibrium with limited experimentation and biased beliefs.

We study how search frictions in the labor market affect firms’ ability to recruit talented workers. In a field experiment in Ethiopia, we show that an employer can attract more talented applicants by offering a small monetary incentive for making a job application. Estimates from a structural model suggest that the intervention is effective because the cost of making a job application is large, and positively correlated with jobseeker ability. We provide evidence that this positive correlation is driven by dynamic selection. In a second experiment, we show that local recruiters underestimate the positive impacts of application incentives.