Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98981
Authors: 
Bellemare, Charles
Shearer, Bruce S.
Year of Publication: 
2014
Series/Report no.: 
IZA Discussion Papers 8214
Abstract: 
We present results from a field experiment designed to measure the importance of managerial commitment to a contract within a firm that pays its workers piece rates. In the tree planting industry the piece rate paid to workers is determined as a function of the difficulty of the terrain to be planted. During the experiment, workers began planting a terrain at a trial piece rate, but were told this rate would be revised upwards if, after a few work days, average productivity was below that observed on a similar (control) terrain on which the firm had committed to the contract. Our results suggest that worker productivity was 20% to 40% lower in the absence of commitment. The reduction was less pronounced when workers had less time to benefit from any subsequent increase in the piece rate. This provides support for models of worker turnover as a means of overcoming ratchet effects.
Subjects: 
ratchet effect
piece rates
incentive contracts
field experiments
JEL: 
J33
M52
C93
Document Type: 
Working Paper

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