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Worker Cooperation and the Ratchet Effect

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  • Carmichael, H Lorne
  • MacLeod, W Bentley

Abstract

Workers paid by the piece should be happy to introduce new techniques that increase output, but firms always seem to reduce the piece rate when workers start earning too much money. Workers respond by restricting output and keeping good new ideas to themselves. We show that this outcome is inevitable in a competitive environment. However, there are noncompetitive situations where firms can use piece rates to get cooperation from their workers. These predictions are consistent with case history evidence from the cotton spinning industry in England in the nineteenth century and the Lincoln Electric Company in the United States even today. Copyright 2000 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 18 (2000)
Issue (Month): 1 (January)
Pages: 1-19

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Handle: RePEc:ucp:jlabec:v:18:y:2000:i:1:p:1-19

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Web page: http://www.journals.uchicago.edu/JOLE/

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Cited by:
  1. Arghya Ghosh & Takao Kato & Hodaka Morita, 2012. "Continuous improvement and competitive pressure in the presence of discrete innovation," Discussion Papers 2012-17, School of Economics, The University of New South Wales.
  2. Ben-Ner, Avner & Kong, Fanmin & Lluis, St├ęphanie, 2012. "Uncertainty, task environment, and organization design: An empirical investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 281-313.
  3. Socha, Karolina, 2014. "Mixed reimbursement of hospitals: Securing high activity and global expenditures control?," COHERE Working Paper 2014:3, COHERE - Centre of Health Economics Research, University of Southern Denmark.
  4. Colin Green & John Heywood, 2012. "Don't Forget the Gravy! Are Bonuses and Time Rates Complements?," Working Papers 13424023, Lancaster University Management School, Economics Department.
  5. Jordi Domenech, 2005. "Labour market adjustment to economic downturns in the Catalan textile industry, 1880-1910: did employers breach implicit contracts?," Economic History Working Papers 22333, London School of Economics and Political Science, Department of Economic History.
  6. Joshua Herries & Daniel I. Rees & Jeffrey S. Zax, 2003. "Interdependence in worker productivity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(5), pages 585-604.
  7. Charness, Gary & Kuhn, Peter J., 2010. "Lab Labor: What Can Labor Economists Learn from the Lab?," IZA Discussion Papers 4941, Institute for the Study of Labor (IZA).
  8. Stefanec, Noah Patrick, 2010. "Incentive pay: Productivity, sorting, and adjacent rents," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(2), pages 171-179, April.
  9. Michael Waldman, 2012. "Theory and Evidence in Internal LaborMarkets
    [The Handbook of Organizational Economics]
    ," Introductory Chapters, Princeton University Press.
  10. Bingley, Paul & Eriksson, Tor, 2001. "Pay Spread and Skewness, Employee Effort and Firm Productivity," Working Papers 01-2, University of Aarhus, Aarhus School of Business, Department of Economics.
  11. Avner Ben-Ner & Fanmin Kong & Stephanie Lluis, . "Uncertainty and Organization Design," Working Papers 0107, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).

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