Standard promotion practices versus up-or-out contracts
AbstractThis article develops a theory concerning the choice between standard promotion practices and up-or-out contracts. Our theory is based on asymmetric learning and promotion incentives. We find that firms employ up-or-out contracts when firm-specific human capital is low and standard promotion practices when it is high. We also find that, if commitment to a wage floor is feasible and effort provision is important, up-or-out is employed when low- and high-level jobs are similar. These results are consistent with many of the settings in which up-or-out is typically observed, such as law firms and academia. Copyright (c) 2010, RAND.
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Bibliographic InfoArticle provided by RAND Corporation in its journal The RAND Journal of Economics.
Volume (Year): 41 (2010)
Issue (Month): 2 ()
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Other versions of this item:
- Suman Ghosh & Michael Waldman, 2006. "Standard Promotion Practices Versus Up-Or-Out Contracts," Working Papers 06007, Department of Economics, College of Business, Florida Atlantic University.
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