Measuring Ratchet Effects within a Firm: Evidence from a Field Experiment varying Contractual Commitment

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01 Mai 2014
Types de publication: 
Cahier de recherche
Auteur(s): 
Charles Bellemare
Bruce Shearer
Axe de recherche: 
Politiques publiques et réglementation
Mots-clés: 
Ratchet effect
Piece rates
Incentive contracts
Field experiments
Classification JEL: 
J33
M52
C93

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.

Contact: 

Bellemare : Département d’économique, Université Laval, CIRPÉE, IZA cbellemare@ecn.ulaval.ca

 

Shearer : Département d’économique, Université Laval, CIRPÉE, IZA, CIRANO bruce.shearer@ecn.ulaval.ca