Team‐based, performance‐contingent pay plans are designed to increase workers’ motivation and productivity. Evaluates differential performance among 65 workers employed in 20 teamwork groups in a public‐sector organization. Study results are in two directions: first, introduction of an incentive scheme increased productivity by 14 per cent. Second, differential teamwork performance is affected by tenure and education. Finds tenure, which represents “firm‐specific human capital” and years of schooling representing “general human capital”, are positive and significant in both a bivariate Pearson correlation and in multivariate regression analysis. An interaction effect of tenure and education was not found to be significant, probably due to colinearity problems. Discusses results from both labour economics and social psychology perspectives.
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