Piece-rate contracts for other-regarding workers

William S. Neilson, Jill Stowe

Research output: Contribution to journalArticlepeer-review

34 Scopus citations

Abstract

When workers are paid with piece rates, inequality arises naturally. We consider workers who care about income comparisons and are either status seeking or inequality averse. We identify circumstances under which inequality attitudes lead workers to exert more effort than they would otherwise, and also circumstances under which workers' inequality attitudes lead firms to set lower piece rates than they would otherwise. The key behavioral assumption for both of these results to hold when workers are identical is behindness aversion, the property that changes in inequality matter more to the worker when he is behind than when he is ahead. (JEL D01, J33, M52).

Original languageEnglish
Pages (from-to)575-586
Number of pages12
JournalEconomic Inquiry
Volume48
Issue number3
DOIs
StatePublished - Jul 2010

ASJC Scopus subject areas

  • General Business, Management and Accounting
  • Economics and Econometrics

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