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Reputation, Career Concerns, and Job Assignments

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  • Martinez Leonardo

    ()
    (Federal Reserve Bank of Richmond)

Abstract

This paper presents a tractable model that allows us to study career concerns when the strength of a worker's incentives depends on his employment history. More specifically, the paper incorporates standard job assignments into the main model in Holmstrom (1999). Equilibrium wages, equilibrium job assignments, and the strength of career-concern incentives are the same for all employment histories that lead to the same worker's reputation. (With reputation we refer to beliefs about the worker's future productivity.) We show that, typically, workers with better reputation have stronger incentives than workers with worse reputation. Furthermore, we show that when the strength of incentives depends on employment history, (i) a ratchet effect may appear, (ii) in spite of this ratchet effect, incentives may be stronger, and (iii) incentives may be stronger when beliefs about ability are more precise.

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Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 9 (2009)
Issue (Month): 1 (May)
Pages: 1-29

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Handle: RePEc:bpj:bejtec:v:9:y:2009:i:1:n:15

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Cited by:
  1. Heski Bar-Isaac & Joyee Deb, 2012. "Reputation for a Servant of Two Masters," Working Papers 12-08, New York University, Leonard N. Stern School of Business, Department of Economics.
  2. Leonardo Martinez, 2009. "Why could political incentives be different during election times?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 315-334.
  3. Braz Camargo, 2011. "Career Concerns: A Human Capital Perspective," 2011 Meeting Papers 1274, Society for Economic Dynamics.

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