IDEAS home Printed from https://ideas.repec.org/a/eee/ecoedu/v84y2021ics027277572100073x.html
   My bibliography  Save this article

The Information Content of Employee Awards

Author

Listed:
  • Schiman, Jeffrey C.

Abstract

Employers often provide awards to employees to induce greater effort. Although a merit award system may increase effort and productivity, it may also produce unintended consequences if it provides new information to the labor market that enables outside employers to differentiate workers more accurately by their effectiveness. In this paper, I present evidence on the signaling effects of merit awards received by school principals in Chicago using regression discontinuity design methods. I find that principals who just exceeded the threshold for a merit award are over twice as likely to exit their school the year after winning compared to principals who fell just short of the award threshold, consistent with the notion that the labor market views the award as a signal of principal effectiveness. Difference-in-differences estimates show that the award program incentives increased achievement, highlighting the importance of program modifications that reduce the loss of more effective school leaders.

Suggested Citation

  • Schiman, Jeffrey C., 2021. "The Information Content of Employee Awards," Economics of Education Review, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:ecoedu:v:84:y:2021:i:c:s027277572100073x
    DOI: 10.1016/j.econedurev.2021.102154
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S027277572100073X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econedurev.2021.102154?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Neckermann, Susanne & Cueni, Reto & Frey, Bruno S., 2014. "Awards at work," Labour Economics, Elsevier, vol. 31(C), pages 205-217.
    2. Cletus C. Coughlin & Adam M. Zaretsky, 1995. "An introduction to the theory and estimation of a job-search model," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 53-65.
    3. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 351-380, October.
    4. J. J. McCall, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(1), pages 113-126.
    5. Benny Moldovanu & Aner Sela & Xianwen Shi, 2007. "Contests for Status," Journal of Political Economy, University of Chicago Press, vol. 115, pages 338-363.
    6. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2011. "Field Experiments with Firms," Journal of Economic Perspectives, American Economic Association, vol. 25(3), pages 63-82, Summer.
    7. Victor Lavy, 2009. "Performance Pay and Teachers' Effort, Productivity, and Grading Ethics," American Economic Review, American Economic Association, vol. 99(5), pages 1979-2011, December.
    8. Jana Gallus & Bruno S. Frey, 2016. "Awards: A strategic management perspective," Strategic Management Journal, Wiley Blackwell, vol. 37(8), pages 1699-1714, August.
    9. Jed DeVaro & Michael Waldman, 2012. "The Signaling Role of Promotions: Further Theory and Empirical Evidence," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 91-147.
    10. Joshua C. Pinkston, 2009. "A Model of Asymmetric Employer Learning with Testable Implications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(1), pages 367-394.
    11. Elizabeth Dhuey & Justin Smith, 2014. "How important are school principals in the production of student achievement?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(2), pages 634-663, May.
    12. Andrew Gelman & Guido Imbens, 2019. "Why High-Order Polynomials Should Not Be Used in Regression Discontinuity Designs," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 37(3), pages 447-456, July.
    13. Nicholas Bloom & Renata Lemos & Raffaella Sadun & John Van Reenen, 2015. "Does Management Matter in schools?," Economic Journal, Royal Economic Society, vol. 0(584), pages 647-674, May.
    14. Thomas S. Dee & James Wyckoff, 2015. "Incentives, Selection, and Teacher Performance: Evidence from IMPACT," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 34(2), pages 267-297, March.
    15. Waldman, Michael, 2013. "Classic promotion tournaments versus market-based tournaments," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 198-210.
    16. Ashraf, Nava & Bandiera, Oriana & Jack, B. Kelsey, 2014. "No margin, no mission? A field experiment on incentives for public service delivery," Journal of Public Economics, Elsevier, vol. 120(C), pages 1-17.
    17. Tara Béteille & Demetra Kalogrides & Susanna Loeb, 2011. "Stepping Stones: Principal Career Paths and School Outcomes," NBER Working Papers 17243, National Bureau of Economic Research, Inc.
    18. Bergman, Peter & Hill, Matthew J., 2018. "The effects of making performance information public: Regression discontinuity evidence from Los Angeles teachers," Economics of Education Review, Elsevier, vol. 66(C), pages 104-113.
    19. Michael Bates, 2020. "Public and Private Employer Learning: Evidence from the Adoption of Teacher Value Added," Journal of Labor Economics, University of Chicago Press, vol. 38(2), pages 375-420.
    20. Berlinski, Samuel & Ramos, Alejandra, 2020. "Teacher mobility and merit pay: Evidence from a voluntary public award program," Journal of Public Economics, Elsevier, vol. 186(C).
    21. Lisa B. Kahn, 2013. "Asymmetric Information between Employers," American Economic Journal: Applied Economics, American Economic Association, vol. 5(4), pages 165-205, October.
    22. Thomas Ahn & Jacob Vigdor, 2014. "The Impact of No Child Left Behind's Accountability Sanctions on School Performance: Regression Discontinuity Evidence from North Carolina," NBER Working Papers 20511, National Bureau of Economic Research, Inc.
    23. Frey Bruno S. & Gallus Jana, 2014. "The Power of Awards," The Economists' Voice, De Gruyter, vol. 11(1), pages 1-5, November.
    24. Gregory F. Branch & Eric A. Hanushek & Steven G. Rivkin, 2012. "Estimating the Effect of Leaders on Public Sector Productivity: The Case of School Principals," NBER Working Papers 17803, National Bureau of Economic Research, Inc.
    25. Jones, Michael D., 2013. "Teacher behavior under performance pay incentives," Economics of Education Review, Elsevier, vol. 37(C), pages 148-164.
    26. Sebastian Calonico & Matias D. Cattaneo & Max H. Farrell & Roc ́ıo Titiunik, 2017. "rdrobust: Software for regression-discontinuity designs," Stata Journal, StataCorp LP, vol. 17(2), pages 372-404, June.
    27. Karthik Muralidharan & Venkatesh Sundararaman, 2011. "Teacher Performance Pay: Experimental Evidence from India," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 39-77.
    28. Coelli, Michael & Green, David A., 2012. "Leadership effects: school principals and student outcomes," Economics of Education Review, Elsevier, vol. 31(1), pages 92-109.
    29. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Berlinski, Samuel & Ramos, Alejandra, 2020. "Teacher mobility and merit pay: Evidence from a voluntary public award program," Journal of Public Economics, Elsevier, vol. 186(C).
    2. Dato, Simon & Grunewald, Andreas & Kräkel, Matthias & Müller, Daniel, 2016. "Asymmetric employer information, promotions, and the wage policy of firms," Games and Economic Behavior, Elsevier, vol. 100(C), pages 273-300.
    3. Oyer, Paul & Schaefer, Scott, 2011. "Personnel Economics: Hiring and Incentives," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 20, pages 1769-1823, Elsevier.
    4. Cassidy, Hugh & DeVaro, Jed & Kauhanen, Antti, 2016. "Promotion signaling, gender, and turnover: New theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 126(PA), pages 140-166.
    5. Braga, Breno, 2018. "Earnings dynamics: The role of education throughout a worker’s career," Labour Economics, Elsevier, vol. 52(C), pages 83-97.
    6. Jed DeVaro & Suman Ghosh & Cindy Zoghi, 2018. "Job Characteristics and Labor Market Discrimination in Promotions," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 57(3), pages 389-434, July.
    7. Xin Jin, 2014. "The Signaling Role of Not Being Promoted: Theory and Evidence," Working Papers 0314, University of South Florida, Department of Economics.
    8. Waldman, Michael, 2016. "The dual avenues of labor market signaling," Labour Economics, Elsevier, vol. 41(C), pages 120-134.
    9. Jin, Xin, 2014. "The Signaling Role of Note Being Promoted: Theory and Evidence," MPRA Paper 58484, University Library of Munich, Germany.
    10. Deutscher, Christian & Gürtler, Marc & Gürtler, Oliver & DeVaro, Jed, 2020. "Firm choice and career success - theory and evidence," European Economic Review, Elsevier, vol. 127(C).
    11. Jens MohrenweiserBy & Gabriele Wydra-Somaggio & Thomas Zwick, 2020. "Information advantages of training employers despite credible training certificates," Oxford Economic Papers, Oxford University Press, vol. 72(3), pages 651-671.
    12. Ian Jewitt & Clare Leaver & Heski Bar-Isaac, 2007. "Information and Human Capital Management," Economics Series Working Papers 367, University of Oxford, Department of Economics.
    13. Gaurab Aryal & Manudeep Bhuller & Fabian Lange, 2022. "Signaling and Employer Learning with Instruments," American Economic Review, American Economic Association, vol. 112(5), pages 1669-1702, May.
    14. Bas Klaauw & António Dias da Silva, 2011. "Wage dynamics and promotions inside and between firms," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(4), pages 1513-1548, October.
    15. Seik Kim & Emiko Usui, 2021. "Employer learning, job changes, and wage dynamics," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1286-1307, July.
    16. Ján Zábojník, 2012. "Promotion tournaments in market equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(1), pages 213-240, September.
    17. Núria Rodríquez-Planas, 2011. "Displacement, Signaling, and Recall Expectations," Working Papers 550, Barcelona School of Economics.
    18. Bandiera, Oriana & Ashraf, Nava & Jack, Kelsey, 2012. "No margin, no mission? A Field Experiment on Incentives for Pro-Social Tasks," CEPR Discussion Papers 8834, C.E.P.R. Discussion Papers.
    19. Ekinci, Emre, 2022. "Employee entrepreneurship and signaling role of corporate venturing decisions," Labour Economics, Elsevier, vol. 79(C).
    20. Mike Helal & Michael Coelli, 2016. "How Principals Affect Schools," Melbourne Institute Working Paper Series wp2016n18, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

    More about this item

    Keywords

    School principals; employee awards; turnover; school achievement;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecoedu:v:84:y:2021:i:c:s027277572100073x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/econedurev .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.