I conducted two field experiments in a tree-thinning setting. In one experiment, farm workers were initially paid hourly wages, before a randomly chosen half were switched into piece rate pay. In the second experiment, workers were switched from hourly to piece rate pay all at once. The difference-in-difference and before-after estimators suggest that the productivity increase has a lower bound of 23 percent and an upper bound of 36 percent. Although the sample size is small, the estimates are statistically significant and robust. While the quality did not drop, the study highlights the measurement costs in setting up the right level of piece rates. I also provide evidence that high ability workers are attracted to piece rate contracts.
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Paper provided by University of Washington, Department of Economics in its series Working Papers with number
UWEC-2007-06.
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