Grades and rank: Impacts of non-financial incentives on test performance

How does effort respond to being graded and ranked? This paper examines the effects of non-financial incentives on test performance. We conduct a randomized field experiment on more than a thousand sixth graders in Swedish primary schools. Extrinsic non-financial incentives play an important role in motivating highly skilled students to exert more effort. We find significant differences in test scores between the intrinsically motivated control group and three of four extrinsically motivated treatment groups. The only treatment not increasing test performance is criterion-based grading on an A-F scale, which is the typical grading method. Test performance is significantly higher if employing rank-based grading or giving students a symbolic reward. The motivational strengths of the non-financial incentives differ across the test score distribution, across the skill distribution, with peer familiarity, and with respect to gender. Boys are only motivated by rank-based incentives, while girls are also motivated by receiving a symbolic reward. Rank-based grading and symbolic rewards tend to crowd out intrinsic motivation for students with low skills, while girls also respond less to rank-based incentives if tested with less familiar peers. (C) 2014 Elsevier B.V. All rights reserved.