Framing and loss aversion in a Chinese factory

John List (of the University of Chicago) and Tanjim Hossain run an experiment in a high-tech Chinese factory where workers’ bonuses are framed as “gains” and “losses.” Both frames boost productivity, but the loss frame boosts it slightly more.

Our study revolves around using insights gained from one of the most influential lines of behavioral research—framing manipulations—in an attempt to increase worker productivity in the facility. Using a natural field experiment, we report several insights. For example, conditional incentives framed as both “losses” and “gains” increase productivity for both individuals and teams. In addition, teams more acutely respond to bonuses posed as losses than as comparable bonuses posed as gains. The magnitude of the effect is roughly 1%: that is, total team productivity is enhanced by 1% purely due to the framing manipulation. Importantly, we find that neither the framing nor the incentive effect lose their importance over time; rather the effects are observed over the entire sample period.

The full paper is gated, unfortunately.

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