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Work Incentives In a Model of Collective With and Without Universal Membership

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  • Bipasa Datta
  • Minquan Liu

Abstract

In this paper we focus on the role of expulsion by a collective to explain the agricultural performance in China during the post-1958 period. We model the collective as having access to a costly and imperfect monitoring technology whereby it can punish members if caught shirking either through expulsion or through a reduction in pay We show that under plausible assumptions about tastes and technology, the threat of expulsion generates greater incentives for both the collective and members to monitor and provide higher effort, respectively. Our model contrasts with the exit right hypothesis advanced by Lin (1990) where the credibility of exit threat is debatable. The threat of expulsion in our model constitutes not only a credible threat but also generates a richer set of equilibrium outcomes which better suit the reality of Chinese collectives.

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Paper provided by Department of Economics, University of York in its series Discussion Papers with number 99/35.

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Handle: RePEc:yor:yorken:99/35

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  1. Bonin John P. & Putterman Louis, 1993. "Incentives and Monitoring in Cooperatives with Labor-Proportionate Sharing Schemes," Journal of Comparative Economics, Elsevier, vol. 17(3), pages 663-686, September.
  2. Lin Justin Yifu, 1993. "Exit Rights, Exit Costs, and Shirking in Agricultural Cooperatives: A Reply," Journal of Comparative Economics, Elsevier, vol. 17(2), pages 504-520, June.
  3. Stiglitz, Joseph E & Weiss, Andrew, 1983. "Incentive Effects of Terminations: Applications to the Credit and Labor Markets," American Economic Review, American Economic Association, vol. 73(5), pages 912-27, December.
  4. Dong Xiao-yuan & Dow Gregory K., 1993. "Does Free Exit Reduce Shirking in Production Teams?," Journal of Comparative Economics, Elsevier, vol. 17(2), pages 472-484, June.
  5. Liu Minquan, 1993. "Exit Right, Retaliatory Shirking, and the Agricultural Crisis in China," Journal of Comparative Economics, Elsevier, vol. 17(2), pages 540-559, June.
  6. Kung James Kaising, 1993. "Transaction Costs and Peasants' Choice of Institutions: Did the Right to Exit Really Solve the Free Rider Problem in Chinese Collective Agriculture?," Journal of Comparative Economics, Elsevier, vol. 17(2), pages 485-503, June.
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