Anatomy of a Contract Change
- (pp. 316-58)
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. (JEL D82, D86, J33, J41, J43, O13, Q12)Citation
Jayaraman, Rajshri, Debraj Ray, and Francis de Véricourt. 2016. "Anatomy of a Contract Change." American Economic Review, 106 (2): 316-58. DOI: 10.1257/aer.20141122Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- D86 Economics of Contract: Theory
- J33 Compensation Packages; Payment Methods
- J41 Labor Contracts
- J43 Agricultural Labor Markets
- O13 Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
- Q12 Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets