Premium
PIECE‐RATE CONTRACTS FOR OTHER‐REGARDING WORKERS
Author(s) -
NEILSON WILLIAM S.,
STOWE JILL
Publication year - 2010
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.2008.00129.x
Subject(s) - inequality , economics , inequity aversion , economic inequality , property (philosophy) , labour economics , set (abstract data type) , demographic economics , mathematical analysis , philosophy , mathematics , epistemology , computer science , programming language
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)