In Simple Words
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.
Casual workers sorting beans in rural Malawi
- 5 MWK per unit
- Comparison rate
- 25 MWK per unit
- Higher output despite a fixed daily fee
Selected lowest and highest rates. Estimated trend adjusts for minimum accepted pay. Everyone received 50 MWK daily; this does not isolate the fee’s effect.
See source →Research question
Assessing whether providing a fixed daily attendance fee alters casual workers' effort responsiveness to piece-rate incentives by creating a baseline income cushion.
Participants
N = 689 participants across 1,875 worker-days in rural Malawi.
Study Design
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).
Results
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.
Takeaway
Combine lump-sum attendance fees with piece-rate pay to reduce show-up friction without dampening worker effort responsiveness.