Does peer pressure or your wage packet determine the effort you put in at work?

Eric Gould, Eyal Winter, Mon, 10/15/2007



How does the effort shown by one worker affect the efforts of fellow workers within the same firm? While frequently proposed behavioural explanations would lead us to expect that one worker trying harder would encourage others to also try harder (and vice versa), irrespective of the roles of the workers concerned, the authors of CEPR DP6527 show how the change in effort put in by one worker can have either a positive or negative impact on co-workers based purely on income-maximizing considerations.

The authors look at the performance of professional baseball players, where pitchers and batters can be seen as substitutes for each other in team performance, while pitchers can be seen as complements for other pitchers and batters as complements for other batters. They find that a players’ batting average significantly increases with the batting performance of other players on the team, but decreases with the quality of the pitching. Furthermore, a pitcher’s performance increases with the pitching quality of his fellow players, but is unaffected by the batting performance of the team.

Their findings are consistent with the intuition that where workers are complements in production, the success of once agent in completing a task contributes more to the prospects of the entire project succeeding if the other agent succeeded as well. In contrast, where workers are substitutes, the marginal contribution of a successfully completed task by one worker is higher when the other worker fails in his task.

The authors conclude that instead of behavioural forces such as peer pressure, guilt, etc., it is the technology of production that that determines how the efforts of one worked can influence that of co-workers. The desire to improve the performance of the whole team and, as a result, the individual wages of the team members is key, and the findings are relevant wherever complementary and substitutability occurs in a workplace.

DP6527 Interactions Between Workers and the Technology of Production: Evidence from Professional Baseball

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Topics:  Labour markets

Tags:  externalities, Peer Effects, Team Production


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