Anatomy of a Contract Change

55 Pages Posted: 25 Jan 2014

See all articles by Rajshri Jayaraman

Rajshri Jayaraman

ESMT European School of Management and Technology

Debraj Ray

New York University (NYU) - Department of Economics; Autonomous University of Barcelona - Instituto de Analisis Economico (CSIC)

Francis de Vericourt

Independent

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Date Written: January 2014

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 20–80%. 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.

Suggested Citation

Jayaraman, Rajshri and Ray, Debraj and de Vericourt, Francis, Anatomy of a Contract Change (January 2014). NBER Working Paper No. w19849, Available at SSRN: https://ssrn.com/abstract=2384306

Rajshri Jayaraman (Contact Author)

ESMT European School of Management and Technology ( email )

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Germany

Debraj Ray

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10003
United States
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212-995-4186 (Fax)

Autonomous University of Barcelona - Instituto de Analisis Economico (CSIC)

Campus UAB
E-08193 Bellaterra
Spain

Francis De Vericourt

Independent

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