Worker Self-Selection and the Profits from Cooperation
Faculty of Economics and Business Administration; Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Ferdinand Von Siemens
Goethe University Frankfurt
IZA Discussion Paper No. 3881
We investigate a competitive labor market with team production. Workers differ in their motivation to exert team effort and types are private information. We show that there can exist a separating equilibrium in which workers self-select into different firms and firms employing cooperative workers make strictly positive profits. Profit differences across firms persist because cooperation strictly increases output and worker separation requires firms employing cooperative workers to pay out weakly lower wages.
Number of Pages in PDF File: 13
Keywords: team work, self-selection
JEL Classification: D82, D86, M50working papers series
Date posted: December 15, 2008
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