Working Longer but Not Harder: The Effects of Input- and Output-Based Pay Allocations on the Duration and Intensity of Effort

• In Event: Effort Effects in Management Accounting

Abstract

Paired participants in an incentivized experiment solve anagram puzzles during six-minute work periods, generating a compensation pool that is allocated based on the input of the time each individual works on the task or on the output of each individual’s correct puzzle solutions. To operationalize aversion to effort duration, participants can redeem unused time for individual payments in addition to their pay allocations from the production task. Relative to output-based pay allocations, we find that input-based allocations increase the amount of time participants devote to the task. Nevertheless, input-based pay also significantly lowers the intensity of participants’ productive effort, even though participants have no meaningful alternatives for the time they willingly spend on the task. When pairs are highly heterogeneous in ability, we find some evidence of impaired total productivity under an input-based pay allocation scheme despite more time spent on the task. Our results suggest that the popularity of input-based incentives in practice can lead to the appearance of increased effort even if total productivity decreases.

Authors

• Eric W Chan, University of Texas at Austin

• Steven J Kachelmeier, University of Texas at Austin

• Xinyu Zhang, University of Texas at Austin