Social norms drive efficient labor contracts, challenging traditional economic theories.
The researchers studied rice planting contracts in the Philippines to see how economic incentives and social norms affect workers' behavior. They used experiments to test different types of contracts and found that piece-rate contracts increase worker performance, while fixed-wage contracts can lead to moral hazard issues. They also discovered that non-monetary incentives like peer pressure can boost performance under fixed-wage contracts. Overall, the study suggests that traditional contracts that may seem inefficient can actually be effective when considering both monetary and social factors.