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Piece Rates, Fixed Wages and Incentives: Evidence from a Field Experiment

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  • Bruce Shearer

Abstract

Data from a field experiment are used to estimate the gain in productivity that is realized when workers are paid piece rates rather than fixed wages. The experiment was conducted within a tree-planting firm and provides daily observations on individual worker productivity under both compensation systems. Unrestricted statistical methods estimate the productivity gain to be 20%. Since planting conditions potentially affect incentives, structural econometric methods are used to generalize the experimental results to out-of-sample conditions. The structural results suggest that the average productivity gain, outside of the experimental conditions, would be at least 21.7%. Copyright 2004, Wiley-Blackwell.

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  • Bruce Shearer, 2004. "Piece Rates, Fixed Wages and Incentives: Evidence from a Field Experiment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(2), pages 513-534.
    • Handle: RePEc:oup:restud:v:71:y:2004:i:2:p:513-534
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    File URL: http://hdl.handle.net/10.1111/0034-6527.00294
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