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Individual incentives and workers' contracts: evidence from a field experiment

Choudhary, M. Ali, Gabriel, Vasco J. and Rickman, Neil (2021) Individual incentives and workers' contracts: evidence from a field experiment. Oxford Economic Papers, 73 (1). 248 - 272. ISSN 0030-7653

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Identification Number: 10.1093/oep/gpz061

Abstract

We present evidence on the operation of incentive pay from a field experiment in Pakistan, looking at piece rates and pay based on rank achieved in a tournament. Importantly, some workers are in contracts 'tying' them to the employer for several picking seasons; others are 'untied', in the sense of being employed for only the current season. We find that incentive pay (of either type) improves productivity by 30%, on average, but that there are important differences across the types of workers: in particular, tournament incentives are less effective amongst the tied workers. We suggest that our main results have implications for tournament theory and the design of incentive pay schemes, particularly with regard to the fact that they may discourage some workers and, thus, reduce incentives.

Item Type: Article
Official URL: https://academic.oup.com/oep
Additional Information: © 2019 Oxford University Press. All rights reserved.
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HB Economic Theory
JEL classification: D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J23 - Employment Determination; Job Creation; Demand for Labor; Self-Employment
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J33 - Compensation Packages; Payment Methods
M - Business Administration and Business Economics; Marketing; Accounting > M5 - Personnel Economics > M52 - Compensation and Compensation Methods and Their Effects (stock options, fringe benefits, incentives, family support programs, seniority issues)
Date Deposited: 01 Apr 2022 15:09
Last Modified: 01 Apr 2022 15:09
URI: http://eprints.lse.ac.uk/id/eprint/114532

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