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

Bruce Shearer
The Review of Economic Studies
Vol. 71, No. 2 (Apr., 2004), pp. 513-534
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/3700636
Page Count: 22
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Piece Rates, Fixed Wages and Incentives: Evidence from a Field Experiment
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Abstract

Data from a field experiment are used to estimate the gain in productivity that is realized when workers are paid piece rates rather than fixed wages. The experiment was conducted within a tree-planting firm and provides daily observations on individual worker productivity under both compensation systems. Unrestricted statistical methods estimate the productivity gain to be 20%. Since planting conditions potentially affect incentives, structural econometric methods are used to generalize the experimental results to out-of-sample conditions. The structural results suggest that the average productivity gain, outside of the experimental conditions, would be at least 21.7%.

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