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Registration

Field Before After
Trial Status in_development completed
Last Published September 11, 2024 11:39 AM February 01, 2025 02:35 PM
Study Withdrawn No
Intervention Completion Date September 13, 2024
Data Collection Complete Yes
Final Sample Size: Number of Clusters (Unit of Randomization) 3030 participants
Was attrition correlated with treatment status? No
Final Sample Size: Total Number of Observations 3030 participants
Final Sample Size (or Number of Clusters) by Treatment Arms 302 No Hourly Offer (Control) 150 $1.20/hr Offer 150 $1.20/hr Offer + Surprise Bonus 50 $1.80/hr Offer 51 $1.80/hr Offer + Surprise Bonus 51 $2.40/hr Offer 52 $2.40/hr Offer + Surprise Bonus 152 $3.00/hr Offer 152 $3.00/hr Offer + Surprise Bonus 50 $3.60/hr Offer 50 $3.60/hr Offer + Surprise Bonus 49 $4.20/hr Offer 50 $4.20/hr Offer + Surprise Bonus 51 $4.80/hr Offer 50 $4.80/hr Offer + Surprise Bonus 50 $5.40/hr Offer 51 $5.40/hr Offer + Surprise Bonus 152 $6.00/hr Offer 153 $6.00/hr Offer + Surprise Bonus 50 $7.20/hr Offer 50 $7.20/hr Offer + Surprise Bonus 51 $8.40/hr Offer 51 $8.40/hr Offer + Surprise Bonus 51 $9.60/hr Offer 50 $9.60/hr Offer + Surprise Bonus 50 $10.80/hr Offer 50 $10.80/hr Offer + Surprise Bonus 152 $12.00/hr Offer 153 $12.00/hr Offer + Surprise Bonus 50 $15.00/hr Offer 50 $15.00/hr Offer + Surprise Bonus 51 $18.00/hr Offer 51 $18.00/hr Offer + Surprise Bonus 304 $21.00/hr Offer (A small number of participants exited early or failed to complete the task within thirty minutes. Observations for these participants are still recorded in my sample, but the Prolific task scheduler automatically re-assigns treatment conditions to a new participant. These re-assigned treatments result in an observation count (N=3,030) that slightly exceeds my pre-registered sample size of 3,000.)
Is there a restricted access data set available on request? No
Program Files No
Data Collection Completion Date September 13, 2024
Is data available for public use? No
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Papers

Field Before After
Paper Abstract For workers facing uncertain output, fixed-wage contracts provide implicit insurance compared to self-employment or performance-based pay. But like any insurance product, these contracts are prone to market distortions through moral hazard and adverse selection. Using a model of wage contracts under asymmetric information, I show how these distortions can be identified as potential outcomes in a marginal treatment effects framework. I apply this framework to a field experiment in which data entry workers are offered a choice between a randomized hourly wage and a standardized piece rate. Using experimental wage offers as an instrument for hourly wage take-up, I find evidence of both moral hazard and adverse selection. Hourly wage contracts reduce worker productivity by an estimated 6.32 percent relative to the mean. Meanwhile, a 10 percent increase in the hourly wage offer attracts a marginal worker whose productivity is higher by 1.44 percent of mean worker output. I estimate the welfare loss associated with asymmetric information and calculate marginal values of public funds (MVPFs) across a range of wage-based subsidy and tax policies. My estimates suggest that a 15 percent tax on performance-based pay can efficiently raise government revenue by correcting the market inefficiencies associated with adverse selection.
Paper Citation Herbst, Daniel, Asymmetric Information in Wage Contracts: Evidence from an Online Experiment (February 01, 2025). Available at SSRN: https://ssrn.com/abstract=5052461 or http://dx.doi.org/10.2139/ssrn.5052461
Paper URL http://dx.doi.org/10.2139/ssrn.5052461
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