GIVE ME A CHALLENGE OR GIVE ME A RAISE
17.01.2018
I study the effect of task difficulty on workers’ effort and compare it to the effect of monetary rewards in a tightly controlled laboratory experiment. I find that task difficulty has an inverse-U effect on effort, and that this effect is quantitatively large when compared to the effect of conditional rewards. Difficulty acts as an important mediator of monetary rewards: they are most effective at the medium level of difficulty.