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Salaries Or Piece Rates: On The Endogenous Matching Of Harvest Workers And Crops

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  • Ivan Kandilov
  • Tomislav Vukina

Abstract

type="main" xml:id="ecin12231-abs-0001"> The objective of this paper is to determine whether the choice of payment schemes (hourly vs. piece rates) is systematically related to the workers' risk aversion and ability. We derive the equilibrium relationship between agents' risk aversion and ability and the power of incentives (payment scheme) in a market where many heterogeneous principals and agents are endogenously matched. The equilibrium matching between principals and agents depends on the traits and is critical in determining the contract choice. Using confidential data from the National Agricultural Workers Survey (NAWS), we find evidence of matching between agricultural workers and the riskiness of their jobs (crops they harvest) based on workers' risk aversion and no matching based on ability. When controlling for matching, we find strong evidence that high risk-averse workers choose hourly rates and low risk-averse workers choose piece rates. We also found that high ability types choose piece rates and low ability types choose hourly rates but the evidence is weaker. (JEL J33, D82, Q12)

Suggested Citation

  • Ivan Kandilov & Tomislav Vukina, 2016. "Salaries Or Piece Rates: On The Endogenous Matching Of Harvest Workers And Crops," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 76-99, January.
    • Handle: RePEc:bla:ecinqu:v:54:y:2016:i:1:p:76-99
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    File URL: http://hdl.handle.net/10.1111/ecin.2016.54.issue-1
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    Citations

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    Cited by:

    1. Kandilov, Amy & Kandilov, Ivan T., 2018. "The Impact of the Minimum Wage on Health Insurance: Evidence from Agricultural Workers," 2018 Annual Meeting, August 5-7, Washington, D.C. 274175, Agricultural and Applied Economics Association.
    2. Silvia Martinez-Gorricho & Miguel Sanchez Villalba, 2021. "A comment on "salaries or piece rates: on the endogenous matching of harvest workers and crops"," Economics Bulletin, AccessEcon, vol. 41(3), pages 1627-1630.
    3. Amy M. G. Kandilov & Ivan T. Kandilov, 2020. "The minimum wage and seasonal employment: Evidence from the US agricultural sector," Journal of Regional Science, Wiley Blackwell, vol. 60(4), pages 612-627, September.
    4. Silvia Martinez-Gorricho & Miguel Sanchez Villalba, 2021. "Incentives, ability and disutility of effort," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 12(3), pages 453-487, September.
    5. Balázs Reizer, 2015. "Do Firms Pay Bonuses to Protect Jobs?," CEU Working Papers 2015_6, Department of Economics, Central European University.
    6. An Li & Jeffrey J. Reimer, 2021. "The US Market for Agricultural Labor: Evidence from the National Agricultural Workers Survey," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(3), pages 1125-1139, September.
    7. Timothy J. Richards, 2020. "Income Targeting and Farm Labor Supply," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(2), pages 419-438, March.
    8. Balazs Reizer, 2016. "Do Firms Pay Bonuses to Protect Jobs?," CERS-IE WORKING PAPERS 1612, Institute of Economics, Centre for Economic and Regional Studies.
    9. Kandilov, Amy & Kandilov, Ivan T., 2018. "The Impact of the Minimum Wage on Employment, Earnings, Wages, and Hours in the U.S. Agricultural Sector," 2018 Annual Meeting, August 5-7, Washington, D.C. 274158, Agricultural and Applied Economics Association.
    10. Ku, Hyejin, 2019. "The effect of wage subsidies on piece rate workers: Evidence from the Penny Per Pound program in Florida," Journal of Development Economics, Elsevier, vol. 139(C), pages 122-134.
    11. Petrick, Martin, 2017. "Incentive provision to farm workers in post-socialist settings: evidence from East Germany and North Kazakhstan," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 20(2), pages 239-256.
    12. Hu, Wu-Yueh & Vukina, Tomislav & Zheng, Viaoyong, 2014. "The Role of Risk and Risk-Aversion in Adoption of Alternative Marketing Arrangements by the U.S. Farmers," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 168930, Agricultural and Applied Economics Association.

    More about this item

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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