Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation

This paper identifies and evaluates rationales for team participation and for the effects of team composition on productivity using novel data from a garment plant that shifted from individual piece rate to group piece rate production over three years. The adoption of teams at the plant improved worker productivity by 14 percent on average. Productivity improvement was greatest for the earliest teams and diminished as more workers engaged in team production, providing support for the view that teams utilize collaborative skills, which are less valuable in individual production. High-productivity workers tended to join teams first, despite a loss in earnings in many cases, suggesting nonpecuniary benefits associated with teamwork. Finally, more heterogeneous teams were more productive, with average ability held constant, which is consistent with explanations emphasizing mutual team learning and intrateam bargaining.