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The Consequences of a Piece Rate on Quantity and Quality: Evidence from a Field Experiment

Author

Listed:
  • Heywood, John S.

    () (University of Wisconsin, Milwaukee)

  • Siebert, W. Stanley

    () (University of Birmingham)

  • Wei, Xiangdong

    () (Lingnan University)

Abstract

This field experiment examines output quantity and quality for workers in a data input business. We observe two sets of workers that differ in monitoring intensity as they move from time to piece rates. The application of piece rates increases quantity, and we find that the resultant quality can be improved with sufficient monitoring. "Committed" workers also produce higher quantity and quality, showing the role of worker selection - which appears especially strong under time rates. Our results thus show how a firm can refine its worker selection and monitoring options together with the payment system to deliver its chosen quality-quantity combination.

Suggested Citation

  • Heywood, John S. & Siebert, W. Stanley & Wei, Xiangdong, 2013. "The Consequences of a Piece Rate on Quantity and Quality: Evidence from a Field Experiment," IZA Discussion Papers 7660, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp7660
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    References listed on IDEAS

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    1. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-431, July.
    2. Raymond P. Guiteras & B. Kelsey Jack, 2014. "Incentives, Selection and Productivity in Labor Markets: Evidence from Rural Malawi," NBER Working Papers 19825, National Bureau of Economic Research, Inc.
    3. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
    4. Glenn MacDonald & Leslie M. Marx, 2001. "Adverse Specialization," Journal of Political Economy, University of Chicago Press, vol. 109(4), pages 864-899, August.
    5. Bruce Shearer, 2004. "Piece Rates, Fixed Wages and Incentives: Evidence from a Field Experiment," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 513-534.
    6. Drago, Robert & Heywood, John S, 1992. "Is Worker Behaviour Consistent with Efficiency Wages?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 39(2), pages 141-153, May.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Uwe Jirjahn & Jens Mohrenweiser, 2015. "Performance Pay and Applicant Screening," Research Papers in Economics 2015-11, University of Trier, Department of Economics.
    2. repec:eee:deveco:v:131:y:2018:i:c:p:42-61 is not listed on IDEAS
    3. Theresa Thompson Chaudhry & Mahvish Faran, 2015. "Organization, Management, and Wage Practices in Pakistan’s Electrical Fan and Readymade Garment Sectors," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 20(Special E), pages 183-204, September.
    4. Raymond P. Guiteras & B. Kelsey Jack, 2014. "Incentives, Selection and Productivity in Labor Markets: Evidence from Rural Malawi," NBER Working Papers 19825, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    piece rate; monitoring; shirking; quantity and quality trade off; field experiment; worker committment;

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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