In the matter of using grades as incentives for students to work, Psychology Today provides some insight. While grades do encourage good students to work harder, they discourage students that do not make the grade who then see no further point working. Also, "working" does not necessarily mean "learning". We know of lots of short-cuts and poor study methods or techniques that can help students "score" but are not particularly helpful for long-term learning and lifeskill development.
A lot of my kids observe that what they learn in school has no application in their future lives. That's true because though they can achieve their As and Bs, they have no further utility for what they've learned. Mere stepping stones, that's all they are, not connecting that what they are about to learn next may well necessitate what they've learned before as a foundational prerequisite. So every time they have to learn something new, it's always from scratch. Painful, and ultimately pointless.
Grades are most useful as feedback; an indicator of what went right and what went wrong in order to adjust the student's path on the learning curve. When we grade students' submissions, our comments in the margins (more constructive and less vitriolic, preferably) are of more value than the digits we assign at the top of their papers. Grades are not meant to compare one student against another. Turn school into a win-lose proposition, and everybody loses.