American Economic Review Vol. 106 No. 2 2016

Anatomy of a Contract Change

Rajshri Jayaraman¹; Debraj Ray²; Francis de Véricourt¹

¹ European School of Management and Technology (ESMT), Schlossplatz 1, 10178 Berlin, Germany (e-mail: ) · ² Department of Economics, New York University, 19 W. 4th Street, New York, NY 10012, and the University of Warwick (e-mail: )

Abstract

We study a contract change for tea pluckers on an Indian plantation, with a higher government-stipulated baseline wage. Incentive piece rates were lowered or kept unchanged. Yet, in the following month, output increased by 20 to 80 percent. This response contradicts the standard model and several variants, is only partly explicable by greater supervision, and appears to be “behavioral.” But in subsequent months, the increase is comprehensively reversed. Though not an unequivocal indictment of “behavioral” models, these findings suggest that nonstandard responses may be ephemeral, and should ideally be tracked over an extended period of time.

DOI

10.1257/aer.20141122

Volume

106

Issue

2

Pages

316-358

Language

en

Sources

openalex bibtex:phds-export.bib crossref

Cite

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