Performance Incentives and Managerial Practices: Experimental Evidence from Local Governments in Peru

This paper examines how public organizations respond to institutional incentive design by comparing an input-based contract with a mixed input- and outcome-based contract. Using a clustered randomized controlled trial across 539 rural municipalities in Peru, I study how these contracts shape managerial practices in the implementation of a national Home Visit Program. While the mixed incentive did not alter home-visit coverage, it produced clear shifts in managerial behavior: municipalities expanded their supervisory staff, rewarded Community Health Workers more frequently, and intensified monitoring of the anemia indicator tied to the contract. They also adopted more targeted innovations for children at risk of anemia, although broader processes, such as training and supervision intensity, remained largely unchanged.