Incentivizing Learning-By-Doing: The Role of Compensation Schemes

Joshua Graff Zivin, Lisa Kahn and Matthew Neidell

No 25799, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, we examine the impact of pay-for-performance incentives on learning-by-doing. We exploit personnel data on fruit pickers paid under two distinct compensation contracts: a standard piece rate plan and a piece rate plan with an extra one-time bonus tied to output. Under the bonus contract, we observe bunching of performance just above the bonus threshold, suggesting workers distort their behavior in response to the discrete bonus. Such bunching behavior increases as workers gain experience. At the same time, the bonus contract induces considerable learning-by-doing for workers throughout the productivity distribution, and these improvements significantly outweigh the losses to the firm from the distortionary bunching. In contrast, under the standard piece rate contract, we find minimal evidence of bunching and only small performance improvements at the bottom of the productivity distribution. Our results suggest that contract design can help foster learning on the job. This underscores the importance of dynamic considerations in principal-agent models.

JEL-codes: J33 J43 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-cta, nep-hrm, nep-lma and nep-ore
Note: LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.nber.org/papers/w25799.pdf (application/pdf)

Related works:
Chapter: Incentivizing Learning-by-Doing: The Role of Compensation Schemes* (2021)
Working Paper: Incentivizing Learning-By-Doing: The Role of Compensation Schemes (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:25799

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w25799

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().