Superstar Teams: The Micro Origins and Macro Implications of Coworker Complementarities

JIWP Number: 2235

Freund, L. B.


Modern production frequently involves teamwork among employees specialized in different tasks. I develop a model of teams in which firms assign tasks to workers who are heterogeneous in their overall quality and whose efficiency varies across different tasks. In addition to productivity gains, the division of labor generates coworker complementarities: the marginal productivity of one employee’s quality is increasing in other team members’ quality. This interdependence is stronger when variation in worker-task specific efficiencies is high. In frictional labor markets, coworker complementarities carry macroeconomic implications for both productivity and inequality. Coworker quality mismatch lowers team productivity, leading employers to search for workers of similar quality. In equilibrium, firms with “superstar teams” pull away in terms of productivity and pay. I validate the model’s key mechanisms using administrative micro data. Paralleling a shift in the nature of tasks, a theory-informed measure of coworker complementarities has doubled since 1990. A structural estimation exercise suggests that this rise explains between one quarter and one half of the increase in the between-firm share of wage inequality in Germany (1990-2010).

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