Payment schemes, peer educators and productivity: Evidence from HIV prevention programs in Karnataka, India

One component of HIV prevention programs in India aims to improve the education of sex workers through the use of peer educators. Peer educator involvement as volunteers or as paid employees has been questioned because of the difficulties with each scheme. The study analyzes the productivity and earnings of 190 peer educators over 18 months, from September 2004 to April 2006 in two districts of the Karnataka state in India. During this period three payment schemes were analyzed: a fixed payment scheme where peer educators were paid 1000 rupees per month, a piece rate payment scheme where peer educators were paid per task they completed and a hybrid scheme that combined the two schemes by paying the peer educators a rate of 1000 rupees per month unless the peers failed to meet the production targets for that month. If they failed to meet targets, earnings would be deducted accordingly.; The OLS findings suggest that the piece rate scheme has a significant and positive effect on productivity but an insignificant effect on overall earnings. The findings also suggest that the hybrid scheme has an insignificant effect on productivity but a significant effect on overall earnings. This suggests that peer educators, when being paid a piece rate, tend to focus on tasks that are easier to accomplish, and therefore they do not necessarily make any more money. This effect is opposite with the hybrid effect. This conclusion highlights the importance of accurately determining the rates attached to the more difficult and higher-earning tasks.