Core readings

Ward, Benjamin. 1958. “The Firm in Illyria: Market Syndicalism” American Economic Review 48(4): 566-589. 

One of the first theoretical analyses of worker co-operatives, which share the organization’s profits equally among the members.  Like teams that use an equal sharing rule, these co-ops have an incentive to admit too few members, relative to the economically efficient number.  

Bandiera, Oriana, Iwan Barankay and Imran Rasul. 2013. “Team Incentives: Evidence from a Firm Level Experiment” Journal of the European Economic Association 11(5):1079–1114.

Strengthening incentives in a field experiment makes workers more likely to form teams with others of similar ability instead of with their friends. 

Kuhn, Peter and Marie Claire Villeval "Are Women More Attracted to Cooperation than Men?" Economic Journal 125 (582) (February 2015), 115–140. 

Conducts a real‐effort experiment where participants choose between individual compensation and team‐based pay. Finds that women choose team‐based pay at least as frequently as men in all conditions, and more often in some conditions.  Women also respond differently to alternative rules for team formation in a manner that is consistent with advantageous inequity aversion. In contrast, men show a greater responsiveness to efficiency gains associated with team production.

Newer Resources

Section 27.1  Who Wants to Join Teams?  Ability Differences and Self-Selection 

Gihleb, Rania and Kevin Lang, (2016). “Educational Homogamy and Assortative Mating Have Not Increased," NBER working paper number 22927.

Some economists have argued that assortative mating between men and women has increased over the last several decades. Sociologists have argued that educational homogamy has increased. This paper shows that neither is correct using both the Current Population Surveys and the decennial Censuses/American Community Survey.

Cooper, David J., Krista Saral, and Marie Claire Villeval “Why Join a Team?”  IZA discussion paper no. 12587, September 2019. 

The authors use lab experiments to study why high ability workers join revenue-sharing teams with less- able co-workers.  Is it because high-ability workers want to help their co-workers financially, or because they expect to realize some long-term financial gains from teaching their teammates?   When team members can communicate, the authors find that high ability workers’ decisions to join teams are driven by expected future financial gains from teaching, and not by their ‘pro-social’ preferences.  There are two main take-aways for managers:  First, team-based pay causes strong adverse selection:  talented workers tend to avoid team-based pay.  Second, adverse selection into teams decreases when high ability workers can reap the gains of mutual learning, which can be facilitated by work environments allow for stable team membership and foster teaching within teams.  

Fischer, Mira, Rainer Michael Rilke, B. Burcin Yurtoglu (2020) Two Field Experiments on Self-Selection, Collaboration Intensity, and Team Performance  IZA Discussion paper no.  13201

Studies how self-selection and random assignment affect team performance for different tasks in two natural field experiments.  When the task does not require much collaboration, self-selected teams perform significantly worse than randomly assigned teams.  But self-selected teams perform better in more collaborative tasks.  In both cases, self-selected teams exhibit positive assortative matching, with subjects more likely to match with those of similar ability and the same gender.

Chiappori, Pierre-André, Monica Costa Dias, and Costas Meghir  (2020)  Changes in Assortative Matching: Theory and Evidence for the US NBER working paper no. 26932

Using a new, general approach to measuring assortative matching in the marriage market, the authors conclude that assortative matching in the US over the last decades, particularly at the top of the education distribution.

Chen, Roy and Jie Gong. “Can Self Selection Create High-Performing Teams?” Journal of Economic Behavior & Organization, Vol 148 (2018): 20–33.

Teams in a workplace can be organized in a number of ways, including random assignment, assignment that attempts to maximize skill complementarities, or allowing workers to self-select.  To measure which approach works best, the authors randomly allocated over 600 business students in a case study course to these three forms of team formation.  When allowed to self-select, the students primarily teamed up with their social connections; these teams performed better than teams formed by random assignment, and just as well as teams assigned by a skill-complementarity algorithm.  The authors conclude that social connections –which lead self-selected teams to work harder—can compensate for lower levels of skill complementarity to produce teams that function just as well. 

Section 27.2 Skill Diversity, Information Sharing and Team Performance

Lyons, Elizabeth, (2017). "Team Production in International Labor Markets: Experimental Evidence from the Field," American Economic Journal: Applied Economics, 9(3):70-104.

Studies the effect of team diversity on productivity using a field experiment where many workers come from different countries.   Finds that teams function better when workers are from the same country.   Thus, at least in this setting, same-country workers are  complements and different-country workers are substitutes.

Agha Leila., Keith Marzilli Ericson, Kimberley H. Geissler and James B. Rebitzer, (2018). “Team Formation and Performance: Evidence from Healthcare Referral Networks,” NBER working Paper No. 24338.

Examines the teams that primary care physicians (PCPs) assemble when referring patients to specialists. Theoretical model finds that team‐specific capital is greater when PCPs concentrate their referrals within a smaller set of specialists. Empirically finds that patients of PCPs with concentrated referrals have lower healthcare costs, with no discernible reduction in quality.

Sandvik, Jason Richard Saouma., Nathan Seegert, BS Christopher T. Stanton, (2020). "Workplace Knowledge Flows," Quarterly Journal of Economics 135(3), August 2020, Pages 1635–1680 

Conducts an experiment where sales employees are paid to have lunch together. Workers learn a lot from lunching with high-performing peers (negative assortative matching); this learning / info sharing does not take place when workers are encouraged to cooperate in other ways.  In contrast to financial incentives, which only improve performance while they are in place, the sales gains from lunch meetings were persistent, suggesting learning effects.  

Adhvaryu, Achyuta, Vittorio Bassi, Anant Nyshadham, and Jorge A. Tamayo (2020) No Line Left Behind: Assortative Matching Inside the Firm NBER working paper no. #27006

The authors find negative assortative matching (NAM) between workers and managers in a large readymade garment manufacturer in India, despite the fact that positive matching would yield 1 to 4 percent more output. The authors explain these results by arguing that long-term relationships with the firm’s buyers forces itto maintain a minimum productivity level across all its production lines, by balancing less-able workers with better managers, and vice versa. 

Weidmann, Ben and David J. Deming (2020) Team Players: How Social Skills Improve Group Performance NBER working paper no. 27071. 

The authors design and test a new method for identifying which individuals contribution the most to a team’s performance, and find that some people consistently cause their group to exceed its predicted performance. These “team players” score significantly higher on a well-established measure of social intelligence, but do not differ across a variety of other dimensions, including IQ, personality, education and gender.  This social skill improves group performance about as much as IQ. 

Schlangenotto, Darius, Wendelin Schnedler, and Radovan Vadovic. 2020 Against All Odds: Tentative Steps Toward Efficient Information Sharing in Groups.  IZA DP No. 13547

The authors use a classroom environment to show that information sharing is poor in large, unstructured groups because it is privately optimal for all participants –both experts and non-experts-- to contribute their bits of information.  Changing the environment to allow people to talk to their neighbors reduces noise and information quality by dramatically increasing the number of people who withhold their information.

Hoffman, Mitchell and Steven Tadelis. People Management Skills, Employee Attrition, and Manager Rewards: An Empirical Analysis  Journal of Political Economy, forthcoming.

The authors study how a manager’s people management skills affect their employees.  Using personnel data from a large, high-tech firm, they show that survey-measured people management skills strongly reduce employee turnover.  Better people managers themselves receive higher subjective performance ratings, higher promotion rates, and larger salary increases. 

Sarsons, Heather, Klarita Gërxhani, Ernesto Reuben, and Arthur Schram 2021 Gender Differences in Recognition for Group Work. Journal of Political Economy, 129(1).

The authors study who gets credit for group work using co-authorship patterns and tenure decisions among academic economists.  Conditional on productivity and other observables, men are tenured similarly regardless of whether they coauthor or solo-author. Women, however, are less likely to receive tenure the more they coauthor.  These results are confirmed in experiments and suggest that gender and stereotypes influence credit attribution for group work.

Dahl, Gordon B., Andreas Kotsadam and Dan-Olof Rooth. 2021 Does Integration Change Gender Attitudes?  The Effect of Randomly Assigning Women to Traditionally Male Teams.  Quarterly Journal of Economics, forthcoming.

The authors study the effects of randomly assigning female recruits to some squads but not others during boot camp in the Norwegian military.  They find that living and working with women for eight weeks causes men to have more egalitarian attitudes, for example on whether men believe housework should be shared equally.  These attitudinal changes are however only temporary in nature.  Contrary to the predictions of many policy makers, the authors did not find that integrating women into squads hurt male recruits’ performance or satisfaction with service.  

Chen, Yiqun Team-Specific Human Capital and Team Performance: Evidence from Doctors American Economic Review, 111(12):3923-62.

What makes teams more productive? Using administrative Medicare claims for two heart procedures, the author shows that shared experience matters:  When the same two individuals work together for a longer period of time, their shared productivity increases more than when team composition changes over the same period of time. In this context, the increase productivity takes the form of substantial reduction in patient mortality.

Opper, Isaac M. Matthew D Baird, and John Engberg. 2022 Optimal Allocation of Seats in the Presence of Peer Effects: Evidence from a Job Training Program Journal of Labor Economics, forthcoming.

How should employers group workers into teams when there are peer effects on performance within teams?  The author study this question using an RCT in job training programs for disadvantaged adults in the United States.  They find large peer effects:  An individual trained in a class with average labor market history one standard deviation above the average is 15 percentage points more likely to be employed in the six quarters post-training  than  an  identical  individual  trained  in  a  cohort  with  average  labor  market history one standard deviation below the average. Given these interactions, the authors propose productivity-increasing way to assign trainees to classes in this context.