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Incentives, learning, task difficulty, and the Peter Principle: Interpreting individual output changes in an Organisational Hierarchy

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  • Barmby, Tim
  • Eberth, Barbara
  • Ma, Ada

Abstract

This paper examines the way in which individuals' output changes as they are promoted within an hierarchical organisation. We suggest a decomposition of the change in output which allows us to see that changes in tournament incentive may in fact disguise part of the observed fall in output. We discuss the role which may be played by learning on the part of line managers, and changes due to the change in grade which a promotion entails. We are unable to distinguish whether the effect of grade itself is due to increased task difficulty or other changes which a higher grade entails such as increased span of control but we show how to work out the contribution which can be attributed directly to the Peter Principle.

Suggested Citation

  • Barmby, Tim & Eberth, Barbara & Ma, Ada, 2012. "Incentives, learning, task difficulty, and the Peter Principle: Interpreting individual output changes in an Organisational Hierarchy," Labour Economics, Elsevier, vol. 19(1), pages 76-81.
    • Handle: RePEc:eee:labeco:v:19:y:2012:i:1:p:76-81
    DOI: 10.1016/j.labeco.2011.08.001
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    References listed on IDEAS

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    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    3. Edward P. Lazear, 2004. "The Peter Principle: A Theory of Decline," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 141-163, February.
    4. Treble, John & van Gameren, Edwin & Bridges, Sarah & Barmby, Tim, 2001. "The internal economics of the firm: further evidence from personnel data," Labour Economics, Elsevier, vol. 8(5), pages 531-552, December.
    5. Edward P. Lazear, 1999. "Personnel Economics: Past Lessons and Future Directions," NBER Working Papers 6957, National Bureau of Economic Research, Inc.
    6. Ehrenberg, Ronald G & Bognanno, Michael L, 1990. "Do Tournaments Have Incentive Effects?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1307-1324, December.
    7. Rick Audas & Tim Barmby & John Treble, 2004. "Luck, Effort, and Reward in an Organizational Hierarchy," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 379-396, April.
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    Cited by:

    1. George J. Borjas & Kirk B. Doran, 2015. "Prizes and Productivity: How Winning the Fields Medal Affects Scientific Output," Journal of Human Resources, University of Wisconsin Press, vol. 50(3), pages 728-758.
    2. Benjamin Artz & Amanda H. Goodall & Andrew J. Oswald, 2020. "How Common Are Bad Bosses?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 59(1), pages 3-39, January.
    3. Stefano Dughera & Alain Marciano, 2022. "Supervise me if you can. Relational feelings, incentive pays and supervisory violations," Journal of Economics, Springer, vol. 136(1), pages 47-72, June.
    4. Alexander K. Koch & Julia Nafziger, 2012. "Job Assignments under Moral Hazard: The Peter Principle Revisited," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(4), pages 1029-1059, December.
    5. Brilon, Stefanie, 2015. "Job assignment with multivariate skills and the Peter Principle," Labour Economics, Elsevier, vol. 32(C), pages 112-121.

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    More about this item

    Keywords

    Tournaments; Peter Principle;

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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