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The Signaling Role of Promotions: Further Theory and Empirical Evidence

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  • Jed DeVaro
  • Michael Waldman

Abstract

An extensive theoretical literature investigates the role of promotions as a signal of worker ability. We extend the theory by focusing on how the signaling role of promotion varies with education and then investigate the resulting predictions using a longitudinal data set that contains detailed information concerning the internal-labor-market history of a medium-sized firm in the financial services industry. Our results support signaling being important for understanding the differences between promotion practices concerning bachelor's and master's degree holders, while the evidence concerning the importance of signaling for high school graduates and PhDs is mixed.

Suggested Citation

  • 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.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/662072
    DOI: 10.1086/662072
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    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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