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Piece Rates and Workplace Injury: Does Survey Evidence Support Adam Smith?

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Disciplines
  • Mathematics

Abstract

While piece rates are routinely associated with greater productivity and higher wages, they may also generate unanticipated effects. This paper uses cross-country European data to provide among the first broad survey evidence of a strong link between piece rates and workplace injury. Despite unusually good controls for workplace hazards, job characteristics and worker effort, workers on piece rates suffer a large 5 percentage point greater likelihood of injury. As injury rates are typically not controlled for when estimating the premium to piece rates, this raises the specter that a portion of the return to piece rates reflects a compensating wage differential for risk of injury.

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