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Internal Promotion Competitions in Firms

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  • Jed DeVaro

Abstract

Using a sample of skilled workers from a cross section of establishments in four metropolitan areas of the United States, I present evidence suggesting that promotions are determined by relative worker performance. I then estimate a structural model of promotion tournaments (treating as endogenous promotions, worker performance, and the wage spread from promotion) that simultaneously accounts for worker and firm behavior and how the interaction of these behaviors gives rise to promotions. The results are consistent with the predictions of tournament theory that employers set wage spreads to induce optimal performance levels, and that workers are motivated by larger spreads. Ordering information: This article can be ordered from ttp://gemini.econ.umd.edu/cgi-bin/rje_online.cgi?action=buy&year=2006&issue=aut&page=521&tid=30492&sc=1869P1N9 .

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 37 (2006)
Issue (Month): 3 (Autumn)
Pages: 521-542

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Handle: RePEc:rje:randje:v:37:y:2006:3:p:521-542

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Cited by:
  1. Edward P. Lazear & Kathryn L. Shaw, 2007. "Personnel Economics: The Economist's View of Human Resources," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 91-114, Fall.
  2. Ján Zábojník, 2012. "Promotion tournaments in market equilibrium," Economic Theory, Springer, vol. 51(1), pages 213-240, September.
  3. Gill, David & Stone, Rebecca, 2009. "Fairness and desert in tournaments," Discussion Paper Series In Economics And Econometrics 0903, Economics Division, School of Social Sciences, University of Southampton.
  4. Delfgaauw, Josse & Dur, Robert & Non, Arjan & Verbeke, Willem, 2012. "The Effects of Prize Spread and Noise in Elimination Tournaments: A Natural Field Experiment," IZA Discussion Papers 6480, Institute for the Study of Labor (IZA).
  5. Andrea Patacconi & Florian Ederer, 2005. "Interpersonal Comparison, Status and Ambition in Organisations," Economics Series Working Papers 222, University of Oxford, Department of Economics.
  6. Josse Delfgaauw & Robert Dur & Arjan Non & Willem Verbeke, 2011. "The Effects of Prize Spread and Noise in Elimination Tournaments: A Natural Field Experiment," Tinbergen Institute Discussion Papers 11-120/1, Tinbergen Institute, revised 11 Jul 2012.
  7. Geir H. Bjertnæs, 2012. "Promotion rat race and public policy," Discussion Papers 686, Research Department of Statistics Norway.
  8. Gürtler, Marc & Gürtler, Oliver, 2013. "The optimality of heterogeneous tournaments," Working Papers IF42V1, Technische Universität Braunschweig, Institute of Finance.
  9. Edward P. Lazear, 1995. "Personnel Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121883.
  10. Waldman, Michael, 2007. "Theory and evidence in internal labor markets," MPRA Paper 5113, University Library of Munich, Germany.
  11. Jed DeVaro & Dana Samuelson, 2005. "Why Are Promotions Less Likely in Nonprofit Firms?," Labor and Demography 0501010, EconWPA.
  12. Geir Bjertnaes, 2012. "Promotion Rat Race and Public Policy," CESifo Working Paper Series 3781, CESifo Group Munich.

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