Different Strokes for Different Folks? Experimental Evidence on the Effectiveness of Input and Output Incentive Contracts for Health Care Providers with Varying Skills

A central issue in designing incentive contracts is the decision to reward agents’ input use versus outputs. The trade-off between risk and return to innovation in production can also lead agents with varying skill levels to perform differentially under different contracts. We study this issue experimentally, observing and verifying inputs and outputs in Indian maternity care. We find that both contract types achieve comparable reductions in postpartum hemorrhage rates, but payments for outputs were four times that of inputs. Providers with varying qualifications performed equivalently under input incentives, while providers with advanced qualifications may have performed better under output contracts.