IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/19825.html
   My bibliography  Save this paper

Incentives, Selection and Productivity in Labor Markets: Evidence from Rural Malawi

Author

Listed:
  • Raymond P. Guiteras
  • B. Kelsey Jack

Abstract

An observed positive relationship between compensation and productivity cannot distinguish between two channels: (1) an incentive effect and (2) worker selection. We use a simplified Becker-DeGroot-Marschak mechanism, which provides random variation in piece rates conditional on revealed reservation rates, to separately identify the two channels in the context of casual labor markets in rural Malawi. A higher piece rate increases output in our setting, but does not attract more productive workers. Among men, the average worker recruited at higher piece rates is actually less productive. Local labor market imperfections appear to undermine the worker sorting observed in well-functioning labor markets.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:19825
    Note: DEV LS
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w19825.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
    2. Marcel Fafchamps & Mans Söderbom & Najy Benhassine, 2009. "Wage Gaps and Job Sorting in African Manufacturing," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 18(5), pages 824-868, November.
    3. Eriksson, Tor & Villeval, Marie Claire, 2008. "Performance-pay, sorting and social motivation," Journal of Economic Behavior & Organization, Elsevier, vol. 68(2), pages 412-421, November.
    4. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2005. "Social Preferences and the Response to Incentives: Evidence from Personnel Data," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 917-962.
    5. Alexandre Mas & Enrico Moretti, 2009. "Peers at Work," American Economic Review, American Economic Association, vol. 99(1), pages 112-145, March.
    6. Lori Beaman & Jeremy Magruder, 2012. "Who Gets the Job Referral? Evidence from a Social Networks Experiment," American Economic Review, American Economic Association, vol. 102(7), pages 3574-3593, December.
    7. Uri Gneezy & Kenneth L. Leonard & John A. List, 2009. "Gender Differences in Competition: Evidence From a Matrilineal and a Patriarchal Society," Econometrica, Econometric Society, vol. 77(5), pages 1637-1664, September.
    8. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-880, June.
    9. Thomas Dohmen & Armin Falk, 2011. "Performance Pay and Multidimensional Sorting: Productivity, Preferences, and Gender," American Economic Review, American Economic Association, vol. 101(2), pages 556-590, April.
    10. Nicholas Bloom & James Liang & John Roberts & Zhichun Jenny Ying, 2015. "Does Working from Home Work? Evidence from a Chinese Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 130(1), pages 165-218.
    11. James Berry & Greg Fischer & Raymond Guiteras, 2020. "Eliciting and Utilizing Willingness to Pay: Evidence from Field Trials in Northern Ghana," Journal of Political Economy, University of Chicago Press, vol. 128(4), pages 1436-1473.
    12. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2011. "Robust Inference With Multiway Clustering," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(2), pages 238-249, April.
    13. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
    14. Ernst Fehr & Lorenz Goette, 2007. "Do Workers Work More if Wages Are High? Evidence from a Randomized Field Experiment," American Economic Review, American Economic Association, vol. 97(1), pages 298-317, March.
    15. 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 of Labor Economics (IZA).
    16. Pamela Jakiela & Owen Ozier, 2016. "Does Africa Need a Rotten Kin Theorem? Experimental Evidence from Village Economies," Review of Economic Studies, Oxford University Press, vol. 83(1), pages 231-268.
    17. Sylvain Chassang & Gerard Padro I Miquel & Erik Snowberg, 2012. "Selective Trials: A Principal-Agent Approach to Randomized Controlled Experiments," American Economic Review, American Economic Association, vol. 102(4), pages 1279-1309, June.
    18. Simon Gächter & Daniele Nosenzo & Martin Sefton, 2012. "The Impact of Social Comparisons on Reciprocity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(4), pages 1346-1367, December.
    19. Armin Falk & Andrea Ichino, 2006. "Clean Evidence on Peer Effects," Journal of Labor Economics, University of Chicago Press, vol. 24(1), pages 39-58, January.
    20. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
    21. Muriel Niederle & Lise Vesterlund, 2007. "Do Women Shy Away From Competition? Do Men Compete Too Much?," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 1067-1101.
    22. Dean Karlan & Jonathan Zinman, 2009. "Observing Unobservables: Identifying Information Asymmetries With a Consumer Credit Field Experiment," Econometrica, Econometric Society, vol. 77(6), pages 1993-2008, November.
    23. Mark M. Pitt & Mark R. Rosenzweig & Mohammad Nazmul Hassan, 2012. "Human Capital Investment and the Gender Division of Labor in a Brawn-Based Economy," American Economic Review, American Economic Association, vol. 102(7), pages 3531-3560, December.
    24. Lori Beaman & Niall Keleher & Jeremy Magruder, 2018. "Do Job Networks Disadvantage Women? Evidence from a Recruitment Experiment in Malawi," Journal of Labor Economics, University of Chicago Press, vol. 36(1), pages 121-157.
    25. Rosenzweig, Mark R, 1978. "Rural Wages, Labor Supply, and Land Reform: A Theoretical and Empirical Analysis," American Economic Review, American Economic Association, vol. 68(5), pages 847-861, December.
    26. Nava Ashraf & James Berry & Jesse M. Shapiro, 2010. "Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia," American Economic Review, American Economic Association, vol. 100(5), pages 2383-2413, December.
    27. Daniel S. Nagin & James B. Rebitzer & Seth Sanders & Lowell J. Taylor, 2002. "Monitoring, Motivation, and Management: The Determinants of Opportunistic Behavior in a Field Experiment," American Economic Review, American Economic Association, vol. 92(4), pages 850-873, September.
    28. Jessica Cohen & Pascaline Dupas, 2010. "Free Distribution or Cost-Sharing? Evidence from a Randomized Malaria Prevention Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 125(1), pages 1-45.
    29. 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.
    30. Bardhan, Pranab K, 1979. "Labor Supply Functions in a Poor Agrarian Economy," American Economic Review, American Economic Association, vol. 69(1), pages 73-83, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bansi Malde & Marcos Vera-Hernández, 2022. "Spillovers of Community-Based Health Interventions on Consumption Smoothing," Economic Development and Cultural Change, University of Chicago Press, vol. 70(4), pages 1591-1629.
    2. Jonathan de Quidt, 2018. "Your Loss Is My Gain: A Recruitment Experiment with Framed Incentives," Journal of the European Economic Association, European Economic Association, vol. 16(2), pages 522-559.
    3. Shukla, Pallavi & Pullabhotla, Hemant K. & Baylis, Kathy, 2022. "Trouble with zero: The limits of subsidizing technology adoption," Journal of Development Economics, Elsevier, vol. 158(C).
    4. Emily Breza & Supreet Kaur & Yogita Shamdasani, 2018. "The Morale Effects of Pay Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 133(2), pages 611-663.
    5. de Quidt, Jonathan, 2014. "Your loss is my gain: a recruitment experiment with framed incentives," LSE Research Online Documents on Economics 58208, London School of Economics and Political Science, LSE Library.
    6. James Berry & Greg Fischer & Raymond Guiteras, 2020. "Eliciting and Utilizing Willingness to Pay: Evidence from Field Trials in Northern Ghana," Journal of Political Economy, University of Chicago Press, vol. 128(4), pages 1436-1473.
    7. Deniz Nebioglu & Ayca Ebru Giritligil, 2018. "Wealth Effects and Labor Supply: An Experimental Study," BELIS Working Papers 2018-01, BELIS, Istanbul Bilgi University.
    8. Fink, Günther & Jack, Kelsey & Masiye, Felix, 2014. "Seasonal Credit Constraints and Agricultural Labor Supply: Evidence from Zambia," IZA Discussion Papers 8657, Institute of Labor Economics (IZA).
    9. Shukla, Pallavi & Pullabhotla, Hemant K. & Baylis, Kathy, 2020. "Subsidizing Agricultural Technology Adoption: An Experimental and Behavioral Economics Approach," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304451, Agricultural and Applied Economics Association.
    10. 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 of Labor Economics (IZA).
    11. Bernard, Mark & Dohmen, Thomas & Non, Arjan & Rohde, Ingrid M.T., 2019. "Menus of contracts determine sorting patterns," Journal of Economic Psychology, Elsevier, vol. 72(C), pages 293-311.
    12. Marcela Ibanez & Gerhard Riener, 2018. "Sorting through Affirmative Action: Three Field Experiments in Colombia," Journal of Labor Economics, University of Chicago Press, vol. 36(2), pages 437-478.
    13. Cole, Shawn & Fernando, A. Nilesh & Stein, Daniel & Tobacman, Jeremy, 2020. "Field comparisons of incentive-compatible preference elicitation techniques," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 33-56.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guiteras, Raymond P. & Jack, B. Kelsey, 2018. "Productivity in piece-rate labor markets: Evidence from rural Malawi," Journal of Development Economics, Elsevier, vol. 131(C), pages 42-61.
    2. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 3, pages 229-330, Elsevier.
    3. Ku, Hyejin, 2019. "The effect of wage subsidies on piece rate workers: Evidence from the Penny Per Pound program in Florida," Journal of Development Economics, Elsevier, vol. 139(C), pages 122-134.
    4. Dohmen, Thomas, 2014. "Behavioral labor economics: Advances and future directions," Labour Economics, Elsevier, vol. 30(C), pages 71-85.
    5. Brice Corgnet & Roberto Hernán-González & Stephen Rassenti, 2011. "Real Effort, Real Leisure and Real-time Supervision: Incentives and Peer Pressure in Virtual Organizations," Working Papers 11-05, Chapman University, Economic Science Institute.
    6. Jörg Peters & Jörg Langbein & Gareth Roberts, 2018. "Generalization in the Tropics – Development Policy, Randomized Controlled Trials, and External Validity," The World Bank Research Observer, World Bank Group, vol. 33(1), pages 34-64.
    7. Peters, Jörg & Langbein, Jörg & Roberts, Gareth, 2016. "Policy evaluation, randomized controlled trials, and external validity—A systematic review," Economics Letters, Elsevier, vol. 147(C), pages 51-54.
    8. Yang, Fanzheng, 2013. "Using laboratory experiments to study otherwise unobservable labor market interactions," ISU General Staff Papers 201301010800004100, Iowa State University, Department of Economics.
    9. Rebitzer, James B. & Taylor, Lowell J., 2011. "Extrinsic Rewards and Intrinsic Motives: Standard and Behavioral Approaches to Agency and Labor Markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 8, pages 701-772, Elsevier.
    10. Gharad Bryan & Dean Karlan & Jonathan Zinman, 2012. "You Can Pick Your Friends, But You Need to Watch Them: Loan Screening and Enforcement in a Referrals Field Experiment," Working Papers 1009, Economic Growth Center, Yale University.
    11. Paulina Oliva & B. Kelsey Jack & Samuel Bell & Elizabeth Mettetal & Christopher Severen, 2020. "Technology Adoption under Uncertainty: Take-Up and Subsequent Investment in Zambia," The Review of Economics and Statistics, MIT Press, vol. 102(3), pages 617-632, July.
    12. Bernard, Mark & Dohmen, Thomas & Non, Arjan & Rohde, Ingrid M.T., 2019. "Menus of contracts determine sorting patterns," Journal of Economic Psychology, Elsevier, vol. 72(C), pages 293-311.
    13. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2011. "Field Experiments with Firms," Journal of Economic Perspectives, American Economic Association, vol. 25(3), pages 63-82, Summer.
    14. Alexandre Mas & Enrico Moretti, 2009. "Peers at Work," American Economic Review, American Economic Association, vol. 99(1), pages 112-145, March.
    15. Goto, Jun & Sawada, Yasuyuki & Aida, Takeshi & Aoyagi, Keitaro, 2015. "Incentives and Social Preferences: Experimental Evidence from a Seemingly Inefficienct Traditional Labor Contract," 2015 Conference, August 9-14, 2015, Milan, Italy 211687, International Association of Agricultural Economists.
    16. Cai, Xiqian & Jiang, Wei & Song, Hong & Xie, Huihua, 2022. "Pay for performance schemes and manufacturing worker productivity: Evidence from a kinked design in China," Journal of Development Economics, Elsevier, vol. 156(C).
    17. Shi Lan, 2010. "Incentive Effect of Piece-Rate Contracts: Evidence from Two Small Field Experiments," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-34, July.
    18. Abhijit Banerjee & Sylvain Chassang & Erik Snowberg, 2016. "Decision Theoretic Approaches to Experiment Design and External Validity," NBER Working Papers 22167, National Bureau of Economic Research, Inc.
    19. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    20. Julie Beugnot & Bernard Fortin & Guy Lacroix & Marie Claire Villeval, 2013. "Social Networks and Peer Effects at Work," Cahiers de recherche 1320, CIRPEE.

    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:nbr:nberwo:19825. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.