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

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