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

Shearer, Bruce

doi:10.1111/0034-6527.00294

Cited by 377 publications

(268 citation statements)

References 30 publications

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“…A series of papers in economics have used existing data or field experiments to investigate the relative merits of flat rate versus piece rate incentive schemes in the workplace (Lazear, 2000;Paarsch and Shearer, 2000;Shearer, 2004;Copeland and Monnet, 2009;Helper et al, 2010;Ederer and Manso, 2013;Al-Ubaydli et al, 2015). 2 The above papers find a positive impact of piece rates on quantity of output, but the evidence is mixed for its impact on quality.…”

Section: Introductionmentioning

confidence: 99%

Loss aversion and the quantity–quality tradeoff

2017

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Firms face an optimization problem that requires a maximal quantity output given a quality constraint. But how do firms incentivize quantity and quality to meet these dual goals, and what role do behavioral factors such as loss aversion play in the tradeoffs workers face? We address these issues with a theoretical model and an experiment in which participants are paid for both quantity and quality of a real effort task. Consistent with the basic economic theory, higher quality incentives encourage participants to shift their attention from quantity to quality. However, we also find that loss averse subjects shift their attention from quality to quantity to a greater degree when quality is weakly incentivized. These results can inform managers of the most appropriate ways to structure contracts.JEL Classifications: D24, J24, J31, J41

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Section: Introductionmentioning

confidence: 99%

Loss aversion and the quantity–quality tradeoff

2017

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“…The effectiveness of financial incentives in raising productivity has found empirical support in sectors such as manufacturing and agriculture (e.g. Lazear, 2000; Shearer, 2004;Bandiera et al, 2005). Lately, economists have started analyzing theoretically optimal incentives when workers may also have prosocial concerns, namely, they are motivated by making a contribution to a social cause (e.g.…”

Section: Introductionmentioning

confidence: 99%

Corporate Philanthropy and Productivity: Evidence from an Online Real Effort Experiment

2015

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Contributing to a social cause can be an important driver for workers in the public and nonprofit sector as well as in firms that engage in Corporate Philanthropy or other Corporate Social Responsibility policies. This paper compares the effectiveness of social incentivesthat take the form of a donation received by a charity of the subject's choice -to financial incentives. We find that social incentives lead to a 13% rise in productivity, regardless of their form (lump sum or related to performance) or strength. The response is strong for subjects with low initial productivity (30%), while high-productivity subjects do not respond. When subjects can choose the mix of incentives half sacrifice some of their private compensation to increase social compensation, with women more likely than men. Furthermore, offering subjects some discretion in choosing their own payment scheme leads to a substantial improvement in performance. Comparing social incentives to an equally costly increase in private compensation for low productivity subjects reveals that the former are less effective in increasing productivity, but the difference is small and not statistically significant. Terms of use: Documents inJEL-Code: D640, J240, J320, L300, M140, M520.

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“…A large empirical literature shows that the use of compensation schemes linked to the employees' performance is associated with improved firms' productivity (see among the others Lazear, 2000, Shearer, 2004, Bandiera et al, 2005. For this reason, the use of these forms of compensations in organizations has been the object of an increased interest among economists and policymakers (see for an overview of articles on the provision of incentives Prendergast et al, 2011).…”

Section: The Literaturementioning

confidence: 99%

Intrinsically Motivated Agents in Teams

Manna

2015

SSRN Journal

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I develop a principal-agent model where a profit-maximizing principal employs two agents to undertake a project. The employees differ in terms of their intrinsic motivation towards the project and this is their private information. I analyze the impact of individual and team incentives on the screening problem of employees with different degrees of motivation within teams. If the principal conditions each agent's wage on his own level of effort (individual incentives), an increase of the rents paid to the motivated agents results in a lower level of effort exerted by all agents in the second-best. In this case, reversal incentives occur. Conversely, reversal incentives do not arise if the principal uses team-incentives. If the principal conditions each agent's wage on the effort of both agents and the agent's performance on the effort of his colleague (team-incentives), motivated agents exert the same level of effort as in the first-best.JEL Codes: D03, D82, M54.

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

Cited by 377 publications

References 30 publications

Loss aversion and the quantity–quality tradeoff

Loss aversion and the quantity–quality tradeoff

Corporate Philanthropy and Productivity: Evidence from an Online Real Effort Experiment

Intrinsically Motivated Agents in Teams

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