Economics research seminar
Incentives, Productivity and Selection in Labor Markets: Evidence from Rural Malawi
Sponsored by: Economics Department
Speaker(s): Raymond Guiteras, University of Maryland
Date & Time: Oct 24, 2012 4:30 PM - 6 PM
Room 501, Peter B. Lewis Building
Please join the Economics Department for a research seminar. This event is open to all Case Western Reserve University faculty, Ph.D. students, economic majors and minors, and those interested in economics research. Contact Teresa Kabat at email@example.com or 216.368.4110 for additional information.
Abstract: An observed positive relationship between compensation and productivity cannot distinguish between two channels: (1) an incentive effect and (2) a selection effect. We use a simplified Becker-Degroot-Marschak mechanism (BDM), which provides random variation in piece rates conditional on revealed reservation rates, to separately identify the two channels in the context of casual labor markets in rural Malawi. In addition, random assignment to a quality
monitoring treatment provides exogenous variation in workers’ incentives to trade off quantity of output for quality. We find that the incentive effect is more important than the selection channel. Women have lower reservation piece rates and higher productivity. Explicit monitoring incentives improve output quality at the expense of quantity, though workers appear to behave according to a gift exchange model in the absence of explicit quality monitoring. Results provide no evidence for income targeting but do suggest that productivity is influenced by the productivity of a worker’s peers.