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

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  • Shearer, Bruce

Abstract

Data from a field experiment, conducted within a tree-planting firm, are used to estimate the gain in productivity that is realized when workers are paid piece rates rather than fixed wages. The experiment provides daily observations on individual worker productivity under both piece rates and fixed wages. ANOVA methods are used to estimate the incentive effect to be 20%. Since planting conditions potentially affect the incentive effect, structural econometric methods are used to generalize the experimental results to out-of-sample conditions. The structural model identifies a lower bound on the incentive effect that is estimated to be 18.5%.

Suggested Citation

  • Shearer, Bruce, 2001. "Piece Rates, Fixed Wages and Incentives: Evidence from a Field Experiment," Cahiers de recherche 0101, Université Laval - Département d'économique.
  • Handle: RePEc:lvl:laeccr:0101
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    File URL: http://www.ecn.ulaval.ca/w3/recherche/cahiers/2001/0101.pdf
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    Cited by:

    1. Christopher Ferrall, 2002. "Estimation and Inference in Social Experiments," General Economics and Teaching 0209001, EconWPA.

    More about this item

    Keywords

    Compensation Systems; Incentives; Experimental Economics; Structural Econometrics;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D2 - Microeconomics - - Production and Organizations
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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