What Happens When Payments End? Fostering Long-Term Behavior Change With Financial Incentives

Abstract

Financial incentives are widely used to get people to adopt desirable behaviors. Many small landholders in developing countries, for example, receive multiyear payments to engage in conservation behaviors, and the hope is that they will continue to engage in these behaviors after the program ends. Although effective in the short term, financial incentives rarely lead to long-term behavior change because program participants tend to revert to their initial behaviors soon after the payments stop. In this article, we propose that four psychological constructs can be leveraged to increase the long-term effectiveness of financial-incentive programs: motivation, habit formation, social norms, and recursive processes. We review successful and unsuccessful behavior-change initiatives involving financial incentives in several domains: public health, education, sustainability, and conservation. We make concrete recommendations on how to implement the four above-mentioned constructs in field settings. Finally, we identify unresolved issues that future research might want to address to advance knowledge, promote theory development, and understand the psychological mechanisms that can be used to improve the effectiveness of incentive programs in the real world.