Abstract
In this paper, the reasons why Chinese agricultural teams could not reply on the threat of internal effort response to solve incentive problems are investigated. The detrimental effects of state extractive agricultural policies, the basic needs program, and Cultural-Revolution-era ideology on the dynamic self-enforcing mechanism in Chinese teams are analysed. Using the data on the teams of a moderately prosperous commune during the period 1970-76, the author estimates the discount factor and the impact of the trigger strategies on workers' effort decisions. It is found that the estimates of the discount factor and the trigger strategy effect are significantly greater than zero in some periods, but not large enough to eliminate the need for monitoring.
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