Job Responsibility, Pay and Promotion
AbstractHow are pay and promotion prospects related to job responsibility? A job entails responsibility to the extent that the value of the job outcome is sensitive to the worker's input of effort. In the author's model, an employer uses termination contracts to elicit effort from workers. The optimal wage increases with responsibility. The author shows that the employer can reduce incentive costs by structuring a job ladder and offering workers a self-enforcing prospect of promotion. In fact, the employers will choose to pay differentiated wages to identical workers in identical jobs, promoting workers from the lower-paying to the higher-paying positions as vacancies occur. Copyright 1997 by Royal Economic Society.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 107 (1997)
Issue (Month): 440 (January)
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- Dirk Sliwka, 2006.
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- Björn Bartling & Urs Fischbacher, 2008. "Shifting the Blame: On Delegation and Responsibility," TWI Research Paper Series 32, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
- Machado, C. Sofia & Portela, Miguel, 2013. "Age and Opportunities for Promotion," IZA Discussion Papers 7784, Institute for the Study of Labor (IZA).
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- Lima, Francisco, 2000. "Internal labour markets: a case study," FEUNL Working Paper Series wp378, Universidade Nova de Lisboa, Faculdade de Economia.
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