Using a natural field experiment, we quantify the impact of one‐dimensional performance‐based incentives on incentivized (quantity) and nonincentivized (quality) dimensions of output for factory workers with a flat‐rate or a piece‐rate base salary. In particular, we observe output quality by hiring quality inspectors unbeknownst to the workers. We find that workers trade off quality for quantity, but the effect is statistically significant only for workers under a flat‐rate base salary. This variation in treatment effects 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 performance pay is less prominent.
Bibliographical noteWe gratefully acknowledge the financial support of SSHRC Grant No. 489160 and from Shanghai University of Finance and Economics.
HONG, F., HOSSAIN, T., LIST, J., & TANAKA, M. (2018). Testing the Theory of Multitasking: Evidence from A Natural Field Experiment in Chinese Factories. International Economic Review, 59(2), 511-536. https://doi.org/10.1111/iere.12278