F. von Siemens
- Team production in competitive labor markets with adverse selection
- Number of pages
- Amsterdam: University of Amsterdam
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
Team production is a frequent feature of modern production processes. Combined with team incentives, team production creates externalities among workers as workers' utility upon accepting a contract depends on their colleagues' productivity. We study the effects of such externalities in a competitive labor market if workers have private information on their productivity. We find that in any competitive equilibrium there is Pareto-effcient separation of workers according to their productivity. We further find that externalities facilitate equilibrium existence, where arbitrarily small externalities can be suffcient to guarantee existence.
- August 11, 2011
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