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Fuhai Hong, Tanjim Hossain, John A List, Migiwa Tanaka

Cited by*: 6 Downloads*: 98

A well-recognized problem in the multitasking literature is that workers might substantially reduce their effort on tasks that produce unobservable outputs as they seek the salient rewards to observable outputs. Since the theory related to multitasking is decades ahead of the empirical evidence, the economic costs of standard incentive schemes under multitasking contexts remain largely unknown. This study provides empirical insights quantifying such effects using a field experiment in Chinese factories. Using more than 2200 data points across 126 workers, we find sharp evidence that workers do trade off the incented output (quantity) at the expense of the non-incented one (quality) as a result of a piece rate bonus scheme. Consistent with our theoretical model, treatment effects are much stronger for workers whose base salary structure is a flat wage compared to those under a piece rate base salary. While the incentives result in a large increase in quantity and a sharp decrease in quality for workers under a flat base salary, they result only in a small increase in quantity without affecting quality for workers under a piece rate base salary.

Fuhai Hong, Tanjim Hossain, John A List, Migiwa Tanaka

Cited by*: 0 Downloads*: 29

Using a natural field experiment with factory workers where we introduce a quantity-based performance-pay scheme in addition to their base salary, we quantify the impact of one-dimensional monetary incentives on both incentivized (quantity) and non-incentivized (quality) dimensions of output. While the management typically observes only quantity, we also observe quality by hiring quality-inspectors unbeknownst to the workers. While some workers receive a flat-rate base salary, others receive a piece-rate base salary. We find sharp evidence that workers under a flat-rate base salary trade off quality for quantity. Interestingly, this quantity-quality trade-off is statistically insignificant for workers under a piece-rate base salary. This variation in the treatment effect is consistent with a simple theoretical model that predicts that when agents are already incented at the margin, the quantity-quality trade-off resulting from additional incentives will be less prominent.