F.A. von Siemens
- Worker self-selection and the profits from cooperation
- Journal of the European Economic Association
- Volume | Issue number
- 7 | 2/3
- Pages (from-to)
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
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.
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