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Are Workers Willing To Pay To Join A Better Team?

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  • Thomas Zimmerfaust

Abstract

Using data from the Major League Baseball free‐agent market, this study is the first to show that the productivity expected of the team a worker will join produces a significant, negative compensating wage differential. The younger workers in the sample drive this result, trading 25% of their wages to join teams with an expected productivity one standard deviation higher. This investment can be recouped if a reasonable increase in human capital occurs. These results are robust to contract length‐wage simultaneity and indicate that investment in human capital motivates the observed tradeoff, suggesting a new pathway through which human capital accumulation can affect wages. Reliable measures of workers' own past productivity and the productivity expected of a worker's future team provide key advantages to identifying these effects. (JEL J31, J24, M54)

Suggested Citation

  • Thomas Zimmerfaust, 2018. "Are Workers Willing To Pay To Join A Better Team?," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 1278-1295, April.
    • Handle: RePEc:bla:ecinqu:v:56:y:2018:i:2:p:1278-1295
    DOI: 10.1111/ecin.12543
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    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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