Thursday, 22 December 2016

Ego trips to the grave: Status competition among German fighter pilots during World War II

Philipp Ager, Leonardo Bursztyn and I have a new working paper, called "Killer Incentives: Status Competition and Pilot Performance during World War II". A short VOXEU column is here. We look at German fighter pilots' victory claims during World War II, and examine the effects of status competition on risk-taking and performance. When a former peer is being recognized, good pilots try harder and score more, but don't die more often; mediocre pilots score a tiny bet extra, but get themselves killed at a much higher rate. In other words, pilots act as if they would rather die than be trumped by someone who they used to fly with in the past.

We discuss why we think this behavior is unlikely to reflect learning about your own type ("Jack is great, I see, and I wasn't that much behind him in school...") or correlated social learning (where some skill both pilots picked up in the past becomes useful all of a sudden, inducing spurious correlations), show that things hold for the Eastern and Western fronts, and for officers and non-commissioned officers/privates

Here is the abstract:
A growing theoretical and empirical literature shows that public recognition can lead to greater effort amongst employees. At the same time, status competition can be associated with excessive expenditure on status goods, higher risk of bankruptcy, and more risk taking amongst money managers. In this paper, we look at the effects of recognition and status competition jointly: We focus on the spillover effects of public recognition on the performance and risk taking of peers. Using newly collected data on monthly victory scores of over 5,000 German pilots during World War II, we find corrosive effects of status competition: When the daily bulletin of the German armed forces mentioned the accomplishments of a particular fighter pilot, his former peers perform markedly better. Outperformance is differential across skill groups. When a former squadron peer is mentioned, the best pilots try harder, score more, and die no more frequently; average pilots win only a few additional victories, but die at a markedly higher rate. Our results suggest that the overall efficiency effects of non-financial rewards can be ambiguous in settings where both risk and output affect aggregate performance.