Incentive-Based Compensation in Police Forces

Abstract

Governments worldwide are increasingly applying management principles to policing, including performance management systems and financial incentives. We study whether eligibility for performance-based bonuses tied to crime reduction improves police outcomes. Using a quasi-experimental design and administrative data from Brazil, we evaluate an incentive-based compensation program that conditioned bonuses on reductions in violent deaths, vehicle robberies, and street robberies. Our results show that police districts eligible for bonuses experienced significant reductions in both targeted and nontargeted crimes, with stronger effects at the end of semester when incentives are steeper. While there is some evidence of gaming in the reclassification of street robberies, this behavior does not undermine the program's overall effectiveness. Overall, our findings highlight the potential of financial incentives to reshape police behavior and reduce crime.