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Human capital acquisition as a competitive response to the promotion distortion

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  • Ori Zax

Abstract

Waldman shows that under the assumption that prospective employers observe whether a worker was promoted, but cannot observe his ability, the promotion policy is inefficient. In the current paper, we show that human capital acquisition made after the players (both worker and employer) observe the worker's ability reduces this inefficiency, even though such an investment is not optimal in some setups.

Suggested Citation

  • Ori Zax, 2020. "Human capital acquisition as a competitive response to the promotion distortion," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 496-509, July.
    • Handle: RePEc:bla:metroe:v:71:y:2020:i:3:p:496-509
    DOI: 10.1111/meca.12286
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    References listed on IDEAS

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    Cited by:

    1. Chen Cohen & Ori Zax, 2022. "Human capital acquisition as a signaling device in promotion competition," Metroeconomica, Wiley Blackwell, vol. 73(2), pages 550-566, May.

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