CMPO Working Paper Series No. 01/37 CMPO is funded by the Leverhulme Trust. Team-Based Incentives in the NHS: An Economic Analysis Marisa Ratto 1 with Simon Burgess 2 , Bronwyn Croxson 1 , Ian Jewitt 3 and Carol Propper 4 1 CMPO, University of Bristol 2 CMPO, University of Bristol, and CEPR 3 Nuffield College, University of Oxford and CEPR 4 CMPO, University of Bristol, and CEPR June 2001 Abstract The NHS Plan welcomes the use of team rewards but does not specify how team based incentives are to be implemented or make clear what types of teams such incentives are to be given to. This paper looks for insights from economic theory on how to define teams and optimal incentive schemes within them. We give a brief description of the incentive mechanisms suggested in the NHS Plan and discuss the implications of the economic theory of team-incentives to the NHS. One implication is that the optimal compensation scheme depends on the type of team. Hence, the definition of teams in the NHS should precede the identification of the system of team rewards. We therefore examine which types of teams might be suitable for team rewards. We then consider issues in the use of financial incentives for such teams. JEL Classification: D23, J41 Keywords: team production, NHS, financial incentives Acknowledgements We thank the Leverhulme Trust for funding CMPO and this project. Address for Correspondence Department of Economics University of Bristol 8 Woodland Road Bristol BS8 1TN Tel: +44 (0)117 954 6944 m.l.ratto@bristol.ac.uk