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Anatomy of a Contract Change

  • Rajshri Jayaraman
  • Debraj Ray
  • Francis de Vericourt

We study a contract change for tea pluckers on an Indian plantation, with a higher government-stipulated baseline wage. Incentive piece rates were lowered or kept unchanged. Yet, in the following month, output increased by 20–80%. This response contradicts the standard model and several variants, is only partly explicable by greater supervision, and appears to be “behavioral.” But in subsequent months, the increase is comprehensively reversed. Though not an unequivocal indictment of “behavioral” models, these findings suggest that non-standard responses may be ephemeral, and should ideally be tracked over an extended period of time.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19849.

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Date of creation: Jan 2014
Date of revision:
Publication status: published as American Economic Review, vol. 106, no. 2, February 2016 (pp. 316-58)
Handle: RePEc:nbr:nberwo:19849
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