IDEAS home Printed from https://ideas.repec.org/a/uwp/jhriss/v34y1999i4p643-667.html
   My bibliography  Save this article

The Response of Worker Effort to Piece Rates: Evidence from the British Columbia Tree-Planting Industry

Author

Listed:
  • Harry J. Paarsch
  • Bruce S. Shearer

Abstract

We measure the elasticity of worker effort with respect to changes in the piece rate using panel data collected from the payroll records of a British Columbia tree-planting firm. Our data contain information on daily worker productivity and the piece rate received over a five-month period. Using a structural model to control for the endogeneity of the piece rate, we estimate this elasticity to be approximately 2.14. We also calculate a nonstructural lower bound to this elasticity equal to 0.77. Structural estimation also allows us to perform policy experiments and to compare firm profits under alternative compensation systems. Our results suggest that profits would increase by at least 17 percent were the firm to implement the optimal static contract as predicted by principal-agent theory. This increase in profits would be due to capturing worker rents after the revelation of private information over ability. Yet, only a negligible proportion of these rents could be captured while inducing workers to reveal ability truthfully, suggesting that dynamic considerations were important in determining the firm's actual choice of contract.

Suggested Citation

  • Harry J. Paarsch & Bruce S. Shearer, 1999. "The Response of Worker Effort to Piece Rates: Evidence from the British Columbia Tree-Planting Industry," Journal of Human Resources, University of Wisconsin Press, vol. 34(4), pages 643-667.
  • Handle: RePEc:uwp:jhriss:v:34:y:1999:i:4:p:643-667
    as

    Download full text from publisher

    File URL: http://www.jstor.org/stable/pdfplus/146411
    Download Restriction: A subscripton is required to access pdf files. Pay per article is available.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uwp:jhriss:v:34:y:1999:i:4:p:643-667. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://jhr.uwpress.org/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.