Many complex organizations, such as planned Soviet enterprises and the U.S. military, routinely transfer employees between jobs. Since this sacrifices job-specific human capital, the practice is puzzling. This article shows that regular job transfers may be part of an optimal incentive scheme in organizations plagued by the ratchet effect. The ratchet effect arises when an employer is uncertain as to the productivity of the various positions or jobs within an organization. Workers in highly productive jobs then have an incentive to disguise the productivity of their jobs by expending low effort and producing low output. This avoids having the employer construct more demanding remuneration schemes once the high productivity of a job becomes known. Job transfers break the link between current performance and future incentive schemes, and hence remove the incentive-stifling implications of the ratchet effect. This article examines the tradeoff between providing more effective incentives via job transfers and the accompanying sacrifice of job-specific human capital, establishes conditions under which job transfers are optimal, and develops comparative static results.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 18 (1987) Issue (Month): 2 (Summer) Pages: 275-286 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
For technical questions regarding this item, or to correct its listing, contact: ().
Related research
Keywords:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Hendrikse, G.W.J., 2000.
"Organizational Change and Vested Interests,"
Research Paper
ERS-2000-17-ORG Revision_, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
[Downloadable!]
Gary Charness & Peter Kuhn & Marie-Claire Villeval, 2008.
"Competition and the Ratchet Effect,"
Working Papers
0828, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
[Downloadable!]