Individual effort is key to generate income and escape from poverty. In small-scale societies in developing countries, where effort and resulting income are easily observable, social comparison can influence effort in both positive and negative ways.
To study the effects of social comparison, we use a lab experiment in which participants conduct a real-effort task characterized by a quantity-quality trade-off. We experimentally vary whether 1) feedback is provided about peers’ performance and 2) one can reduce peers’ by so-called “money-burning”. We find that feedback about peers’ performance increases the earnings of low-performers as they shift effort from quantity to quality.