We investigate the efficiency of piece-rate contracts using data from a field experiment, conducted within a tree-planting firm. During the experiment, the piece rate paid to planters was exogenously increased. Regression methods yield an estimate of the elasticity of output with respect to...

We use data from a field experiment to estimate worker reaction to incentives and the optimality of piece-rate contracts. Our estimate of the elasticity of output with respect to piece rates is 0.39. Regression methods cannot predict performance under hypothetical contracts. Therefore, we apply...