1 Are Workers Willing to Pay to Join a Better Team?

Using data from the Major League Baseball free-agent market, this study finds that an average free agent trades away wages to join a team expected to be more productive. More importantly, the young in the sample drive this result: an average, young free agent trades roughly 25 % of his wages to join a team with an expected productivity one standard deviation higher. In contrast, the wages of older free agents are unaffected by expected team productivity. These results are robust to a variety of wage-determinant controls, remain consistent across a set of robustness checks, and suggest that better teams provide an important human capital investment opportunity. High-quality measures of both workers ’ own past productivity and the expected productivity of a worker’s future team provide key advantages to identifying these effects. This study is the first to show that the expected productivity of the team a worker will join produces a significant and negative compensating wage differential and may offer a human capital investment option