Data from a field experiment, conducted within a tree-planting firm, are used to estimate the gain in productivity that is realized when workers are paid piece rates rather than fixed wages. The experiment provides daily observations on individual worker productivity under both piece rates and fixed wages. ANOVA methods are used to estimate the incentive effect to be 20%. Since planting conditions potentially affect the incentive effect, structural econometric methods are used to generalize the experimental results to out-of-sample conditions. The structural model identifies a lower bound on the incentive effect that is estimated to be 18.5%.

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Paper provided by Université Laval - Département d'économique in its series Cahiers de recherche with number 0101.

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Date of creation: 2001
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Handle: RePEc:lvl:laeccr:0101

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Keywords: Compensation Systems; Incentives; Experimental Economics; Structural Econometrics;

Find related papers by JEL classification:
C9 - Mathematical and Quantitative Methods - - Design of Experiments
D2 - Microeconomics - - Production and Organizations
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

This paper has been announced in the following NEP Reports:

• NEP-ALL-2002-04-15 (All new papers)
• NEP-EXP-2002-04-15 (Experimental Economics)

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