NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Anatomy of a Contract Change

Rajshri Jayaraman, Debraj Ray, Francis de Vericourt

NBER Working Paper No. 19849
Issued in January 2014
NBER Program(s):   DEV

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 20–80%. 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 non-standard responses may be ephemeral, and should ideally be tracked over an extended period of time.

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This paper was revised on May 11, 2016

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Document Object Identifier (DOI): 10.3386/w19849

Published: American Economic Review, vol. 106, no. 2, February 2016 (pp. 316-58)

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