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Piece-Rate Incentive Schemes

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Author Info
Gibbons, Robert
Abstract

This paper uses recent results from incentive theory to study heretofore informal critiques of piece-rate compensation schemes. Th e informal critiques are based on the history of failed attempts to i nstall piece-rate compensation schemes at the turn of the century. Th e formal analysis emphasizes the importance of information and commit ment in contracting. The main result is as follows: in a work environ ment characterized by hidden information and a hidden action, if neit her the firm nor the worker can commit to future behavior, then no co mpensation scheme, piece-rate or otherwise, can induce the worker not to restrict output. Copyright 1987 by University of Chicago Press.

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

Volume (Year): 5 (1987)
Issue (Month): 4 (October)
Pages: 413-29
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Handle: RePEc:ucp:jlabec:v:5:y:1987:i:4:p:413-29

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  2. David J. Cooper et al., 1999. "Gaming against Managers in Incentive Systems: Experimental Results with Chinese Students and Chinese Managers," American Economic Review, American Economic Association, vol. 89(4), pages 781-804, September. [Downloadable!] (restricted)
  3. James B. Rebitzer & Lowell J. Taylor, 1991. "The Consequences of Minimum Wage Laws: Some New Theoretical Ideas," NBER Working Papers 3877, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Kaarbøe, Oddvar M. & Olsen, Trond E., 2004. "Distorted Performance Measures and Dynamic Incentives," Discussion Papers 2004/21, Department of Finance and Management Science, Norwegian School of Economics and Business Administration. [Downloadable!]
  5. Lazear, Edward P., 2003. "Output-Based Pay: Incentives, Retention or Sorting?," IZA Discussion Papers 761, Institute for the Study of Labor (IZA). [Downloadable!]
  6. W. Bentley MacLeod & Daniel Parent, 1998. "Job Characteristics and the Form of Compensation," CIRANO Working Papers 98s-08, CIRANO. [Downloadable!]
  7. D. K"Ubler, . "Auctioning Off Labor Contracts: Legal Restrictions Reconsidered," Sonderforschungsbereich 373 1996-22, Humboldt Universitaet Berlin.
  8. George Baker & Robert Gibbons & Kevin J. Murphy, 1993. "Subjective Performance Measures in Optimal Incentive Contracts," NBER Working Papers 4480, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Roland Kirstein, 2009. "Risk-Neutral Monopolists are Variance-Averse," FEMM Working Papers 09012, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management. [Downloadable!]
  10. Daniel Parent, 2001. "Incentive Pay in the United States: Its Determinants and Its Effects," CIRANO Working Papers 2001s-04, CIRANO. [Downloadable!]
  11. John S Heywood & Colin Green, 2007. "Performance pay, sorting and the dimensions of job satisfaction," Working Papers 004731, Lancaster University Management School, Economics Department. [Downloadable!]
  12. D. K"Ubler, . "General Training and Information Costs: Who Benefits from Flexible Workers?," Sonderforschungsbereich 373 1996-23, Humboldt Universitaet Berlin.
  13. Simon Burgess & Marisa Ratto, 2003. "The Role of Incentives in the Public Sector: Issues and Evidence," The Centre for Market and Public Organisation 03/071, Department of Economics, University of Bristol, UK. [Downloadable!]
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