Skill Diversity and Leadership in Team Production

Using a team production model with heterogeneous workers, we investigate the short- and long-run efficiency effects of skill diversity and leadership in teams. Our analysis focuses on the effects of various team structures on workers' incentives to change their skills or motivation. In the short run, heterogeneous pairing yields greater total production than homogeneous pairing. However, in the long run, homogeneous pairing may yield greater total production because of gradual improvements in workers' skills/motivation. We also show that the presence of leadership may yield greater production in the long run by preventing workers from continually reducing their skill/motivation.