In recent years, educators and economists have experimented with a number of innovations to improve academic outcomes of students in developing countries. Providing cash rewards to students based on academic achievement may be a cost effective approach to achieve the goal. However, psychologists contend that external rewards undermines students' internal motivation to learn. To test these hypotheses, I am conducting a field experiment among eighth graders in public schools in the suburbs of Kathmandu, Nepal. Students receive cash reward at the end of each of three semesters based on their grades. Each exam is worth 100 points, and each point is worth 5 rupees (approximately 7 US cents). Therefore, each student can earn up to 500 rupees per semester. From a pool of 33 schools, the incentive scheme is offered to students in 11 randomly selected schools while the remaining 22 schools serve as the comparison group. At the end of the year, students take a district level examination. Scores of incentive recipients will be compared to that of non-recipients to gauge the impact of cash rewards on outcomes. Preliminary analysis shows that recipients have higher score than non-recipients in some subjects, the scores are similar in other subjects, and lower in yet other subjects. However, final conclusion can only be made after analyzing the scores from district level exam. Survey responses of students shows that that external rewards has had no noticeable impact on students' intrinsic motivation to learn.


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