Recruitment, Effort, and Retention Effects of Performance Contracts for Civil Servants: Experimental Evidence from Rwandan Primary Schools

This paper reports on a two-tiered experiment designed to separately identify the selection and effort margins of pay for performance (P4P). At the recruitment stage, teacher labor markets were randomly assigned to a “pay-for-percentile” or fixed-wage contract. Once recruits were placed, an unexpected, incentive-compatible, school-level re-randomization was performed so that some teachers who applied for a fixed-wage contract ended up being paid by P4P, and vice versa. By the second year of the study, the within-year effort effect of P4P was 0.16 standard deviations of pupil learning, with the total effect rising to 0.20 standard deviations after allowing for selection. (JEL C93, I21, J23, J33, J41, J45, O15)

Recruitment, Effort, and Retention Effects of Performance Contracts for Civil Servants: Experimental Evidence from Rwandan Primary Schools

This paper reports on a two-tiered experiment designed to separately identify the selection and effort margins of pay-for-performance (P4P). At the recruitment stage, teacher labor markets were randomly assigned to a pay-for-percentile or fixed-wage contract. Once recruits were placed, an unexpected, incentive-compatible, school-level re-randomization was performed, so that some teachers who applied for a fixed-wage contract ended up being paid by P4P, and vice versa. By the second year of the study, the within-year effort effect of P4P was 0.16 standard deviations of pupil learning, with the total effect rising to 0.20 standard deviations after allowing for selection.

A Foundation for Efficiency Wage Contracts

In many jobs, the worker generates only subjective performance measures privately observed by the employer, and contracts must rely on employer reports about these measures. This setting is a game with private monitoring, and prior work suggests that the optimal contract may be complex and non-recursive. I introduce a novel equilibrium refinement and show that the optimal contract simplifies to an efficiency wage contract: The worker receives a wage above his outside option and reports take a pass-fail form. Each report depends only on performance since the previous report, and effort incentives are provided purely through the threat of termination. (JEL D86, J41)

Tinjauan Hukum Islam Terhadap Upah Pembajak Sawah di Desa Klesem Pacitan

This paper discusses the review of Islamic law regarding the contract of renting a tractor to plow the fields in Klesem Village, Kebon Agung Subdistrict, Pacitan Regency. The aim is to find out whether the practice is in accordance with Islamic law or not. In general, the wage contract in Klesem Village can be classified into the ijarah contract in Islamic law. The main principle in the ijarah contract is mutual benefit and prohibited from judging. Determination of wages must be clear which includes the amount of wages and the procedure for payment. This study finds out that, plow machine service providers often do not keep the time and ask for additional from the wages previously promised. Determination of wage changes and cancellation or termination of contracts unilaterally is certainly detrimental to the farmers. Thus, although in general the practice of renting tractors in the village of Klesem is legal according to Islamic law, there are still practices violating the principles of Islamic law.

An Uncertain Wage Contract Model with Adverse Selection and Moral Hazard

This paper considers a wage contract design problem faced by an employer (he) who employs an employee (she) to work for him in labor market. Since the employee's ability that affects the productivity is her private information and cannot be observed by the employer, it can be characterized as an uncertain variable. Moreover, the employee's effort is unobservable to the employer, and the employee can select her effort level to maximize her utility. Thus, an uncertain wage contract model with adverse selection and moral hazard is established to maximize the employer's expected profit. And the model analysis mainly focuses on the equivalent form of the proposed wage contract model and the optimal solution to this form. The optimal solution indicates that both the employee's effort level and the wage increase with the employee's ability. Lastly, a numerical example is given to illustrate the effectiveness of the proposed model.

Private and Public Relative Performance Information under Different Compensation Contracts

ABSTRACT: This study investigates the conditions under which providing relative performance information to employees has a positive effect on performance when compensation is not tied to peer performance. Specifically, I investigate, via an experiment, the effect of relative performance information (present or absent) on performance under two compensation contracts (flat-wage or individual performance-based). Given the presence of relative performance information, I examine the effect of the type of relative performance information (private or public) on performance. Using theory from psychology, I predict and find that relative performance information positively affects performance under the two compensation contracts and that this positive effect is greater under an individual performance-based contract than under a flat-wage contract. I also predict and find that, although both public and private relative performance information have a positive effect on performance, the effect is greater when relative performance information is public. Data Availability: Data are available from the author on request.

A SOLUTION METHOD FOR LINEAR RATIONAL EXPECTATION MODELS UNDER IMPERFECT INFORMATION

This article presents a solution algorithm for linear rational expectation models under imperfect information, in which some decisions are made based on smaller information sets than others. In our solution representation, imperfect information does not affect the coefficients on crawling variables, which implies that, if a perfect-information model exhibits saddle-path stability, for example, the corresponding imperfect-information models also exhibit saddle-path stability. However, imperfect information can significantly alter the quantitative properties of a model. Indeed, this article demonstrates that, with a predetermined wage contract, the standard RBC model remarkably improves the correlation between labor productivity and output.

Relational incentives in Chinese family firms

This paper mainly discusses the choice of managerial compensation contracts in Chinese family firms. Relation or guanxi in Chinese language is an important factor that should be considered because it can bring the shirking cost to the relation-based manager and the caring cost to the owner under Chinese-style differential mode of association (?chaxu geju?). Our theoretical analysis shows that under some conditions it is optimal for the owner to choose the efficiency wage contract, and that under other conditions it is optimal for the owner to choose the share-based incentive contract.