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Monitoring for Worker Quality

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  • Gautam Bose
  • Kevin Lang

Abstract

Much nonmanagerial work is routine, with all workers having similar output most of the time. However, failure to address occasional challenges can be very costly, and consequently easily detected, while challenges handled well pass unnoticed. We analyze job assignment and worker monitoring for such "guardian" jobs. If monitoring costs are positive but small, monitoring is nonmonotonic in the firm's belief about the probability that a worker is good. The model explains several empirical regularities regarding nonmanagerial internal labor markets: low use of performance pay, seniority pay, rare demotions, wage ceilings within grade, and wage jumps at promotion.

Suggested Citation

  • Gautam Bose & Kevin Lang, 2017. "Monitoring for Worker Quality," Journal of Labor Economics, University of Chicago Press, vol. 35(3), pages 755-785.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/690713
    DOI: 10.1086/690713
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    Cited by:

    1. Gadi Barlevy & Derek Neal, 2019. "Allocating Effort and Talent in Professional Labor Markets," Journal of Labor Economics, University of Chicago Press, vol. 37(1), pages 187-246.
    2. Erika Deserranno & Philipp Kastrau & Gianmarco León-Ciliotta, 2021. "Promotions and Productivity: The Role of Meritocracy and Pay Progression in the Public Sector," Working Papers 1239, Barcelona School of Economics.
    3. Naveed Ahmad Khan & Andrija Mihoci & Silke Michalk & Kirill Sarachuk & Hafiz Ali Javed, 2022. "Employee Performance Measures Appraised by Training and Labor Market: Evidence from the Banking Sector of Germany," Administrative Sciences, MDPI, vol. 12(4), pages 1-13, October.
    4. Deserranno, Erika & León-Ciliotta, Gianmarco, 2022. "Promotions and Productivity: The Role of Meritocracy and Pay Progression in the Public Sector," CEPR Discussion Papers 15837, C.E.P.R. Discussion Papers.

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