We analyze the extent to which intergenerational teams provide information on workers' productivity in the long run. We use a dynamic stochastic framework where wages are reputation-based and consider three possible work arrangements. When agents must work independently we show that some uncertainty about their productivity persists at the steady state. Next, our results indicate that when the same technological shocks affect all teammates, then forcing workers to work together reveals their productivity in the steady state. However, some uncertainty on agents' productivities persists in the long run when technological shocks differ across teammates. We also endogenize the decision to work independently or in teams. In this case the problem can be categorized in the class of dynamic games. We compute the Nash-equilibrium work strategies, the direction of inter-workers transfers and the steady-state distribution of wages and utility. Elective teams are preferred by high-productivity young workers when technological shocks are specific to each teammate, and maximize the expected utility of a young worker when shocks are perfectly correlated.
Published May 2001 , 34 pages