Flat Participation Fees and Income Targeting
RCTReview
Assessing whether providing a fixed daily attendance fee alters casual workers' effort responsiveness to piece-rate incentives by creating a baseline income cushion.
Picture this
Imagine a taxi driver who receives a guaranteed $50 payment just for turning on their car each morning. Under target-earning theories, drivers who aim for a fixed daily income quit early once that $50 cushion gets them close to their target; however, when liquidity constraints are severe, the fixed fee does not reduce effort, leaving workers fully responsive to per-job incentive rates.
What the evidence says
Elasticity of effort with respect to piece rates remains positive (+0.06), demonstrating that guaranteed show-up pay does not eliminate piece-rate incentive responsiveness or induce target-earning labor supply contraction.
- Who was studied
- N = 689 participants across 1,875 worker-days in rural Malawi.
- How
- Experimental design offering a fixed 50 MWK daily participation fee (~40-70% of average piece-rate earnings) alongside randomized BDM piece rates (5 to 25 MWK per unit).
What to do
Combine lump-sum attendance fees with piece-rate pay to reduce show-up friction without dampening worker effort responsiveness.
From the source
"Subjects were also informed that they would receive a participation fee of 50 MWK for each day they participated, plus their earnings from the day's work... target earnings model will dampen the response to the piece rate regardless of the participation fee, and reasonable utility functions are unlikely to generate curvature sufficient for the participation fee to make a substantial difference."
Productivity in piece-rate labor markets: Evidence from rural Malawi