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Competitive Screening of a Heterogeneous Labor Force and Corporate Teamwork Attitude

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  • Tymula, Agnieszka

Abstract

The aim of this paper is to analyze the impact of competition on the structure of incentive schemes, workforce composition and the degree of cooperation within firms. We show that in equilibrium high-ability workers, in order to distinguish themselves from the less able workforce, choose the incentive schemes that strongly rely on their own as well as their teammates' performance. They work harder on their own task and are more team-oriented than less skilled workers. Our paper stresses the sorting role of the incentives and provides a rationale for the emergence of different corporate teamwork practices.

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File URL: http://hdl.handle.net/2123/9543
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Bibliographic Info

Paper provided by University of Sydney, School of Economics in its series Working Papers with number 2013-18.

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Date of creation: Nov 2013
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Handle: RePEc:syd:wpaper:2123/9543

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Postal: Sydney, NSW 2006
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Web page: http://sydney.edu.au/arts/economics
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  1. Roland Bénabou & Jean Tirole, 2013. "Bonus Culture: Competitive Pay, Screening, and Multitasking," NBER Working Papers 18936, National Bureau of Economic Research, Inc.
  2. Tor Eriksson & Sabrina Teyssier & Marie Claire Villeval, 2009. "Self-selection and the Efficiency of Tournaments," Post-Print halshs-00451600, HAL.
  3. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
  4. Dohmen, Thomas & Falk, Armin, 2006. "Performance Pay and Multi-dimensional Sorting: Productivity, Preferences and Gender," IZA Discussion Papers 2001, Institute for the Study of Labor (IZA).
  5. Fehr, Ernst & Schmidt, Klaus M., 2004. "Fairness and incentives in a multi-task principal-agent model," Munich Reprints in Economics 20657, University of Munich, Department of Economics.
  6. Michael Kosfeld & Ferdinand A. von Siemens, 2011. "Competition, cooperation, and corporate culture," RAND Journal of Economics, RAND Corporation, vol. 42(1), pages 23-43, 03.
  7. Martin Kocher & Sabine Strauß & Matthias Sutter, 2004. "Individual or team decision-making - Causes and consequences of self-selection," Papers on Strategic Interaction 2004-31, Max Planck Institute of Economics, Strategic Interaction Group.
  8. Mas, Alexandre & Moretti, Enrico, 2006. "Peers at Work," CEPR Discussion Papers 5870, C.E.P.R. Discussion Papers.
  9. Yeon-Koo Che & Seung-Weon Yoo, 2001. "Optimal Incentives for Teams," American Economic Review, American Economic Association, vol. 91(3), pages 525-541, June.
  10. Rafael Rob & Peter Zemsky, 2002. "Social Capital, Corporate Culture, and Incentive Intensity," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 243-257, Summer.
  11. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-36, May.
  12. Edward P. Lazear, 2000. "The Power of Incentives," American Economic Review, American Economic Association, vol. 90(2), pages 410-414, May.
  13. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-28, March.
  14. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation by Skill," NBER Working Papers 5718, National Bureau of Economic Research, Inc.
  15. Barton H. Hamilton & Jack A. Nickerson & Hideo Owan, 2003. "Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 465-497, June.
  16. Tzioumis, Konstantinos, 2008. "Why do firms adopt CEO stock options? Evidence from the United States," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 100-111, October.
  17. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
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Cited by:
  1. Benabou, Roland & Tirole, Jean, 2013. "Bonus Culture: Competitive Pay, Screening, and Multitasking," IZA Discussion Papers 7321, Institute for the Study of Labor (IZA).

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