DP7121 Curbing Cream-Skimming: Evidence on Enrolment Incentives

Author(s): Pascal Courty , Do Han Kim , Gerald Marschke

Publication Date: January 2009

Keyword(s): bureaucrat behavior , cream-skimming , enrolment incentives , Performance measurement , public organizations

JEL(s): H72 , J33 , L14

Programme Areas: Labour Economics

Link to this Page: www.cepr.org/pubs/dps/DP7121.asp.asp

Using data from a large, U.S. federal job training program, we investigate whether enrolment incentives that exogenously vary the ‘shadow prices’ for serving different demographic subgroups of clients influence case workers’ intake decisions. We show that case workers enroll more clients from subgroups whose shadow prices increase but select at the margin weaker-performing members from those subgroups. We conclude that enrolment incentives curb cream-skimming across subgroups leaving a residual potential for cream-skimming within a subgroup.