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A Theory of Compensation and Personnel Policy in Hierarchical Organizations with Application to the United States Military

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  • Asch, Beth J
  • Warner, John T

Abstract

A large literature attempts to explain compensation and personnel policies in large organizations. Three features of the U.S. military system flat rank spreads in pay, a relatively generous pension, and heavy reliance on up-or-out promotions are at variance with common practices in large civilian organizations. This article develops a model of individual decision making in a large, hierarchical organization and uses the model to explain these apparent puzzles. The lack of lateral entry and heterogeneity in entrants' abilities and preferences for military service play key roles in the observed policies. Copyright 2001 by University of Chicago Press.

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  • Asch, Beth J & Warner, John T, 2001. "A Theory of Compensation and Personnel Policy in Hierarchical Organizations with Application to the United States Military," Journal of Labor Economics, University of Chicago Press, vol. 19(3), pages 523-562, July.
    • Handle: RePEc:ucp:jlabec:v:19:y:2001:i:3:p:523-62
    DOI: 10.1086/322072
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    References listed on IDEAS

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    Cited by:

    1. Curtis J. Simon & Sebastian Negrusa & John T. Warner, 2010. "Educational Benefits And Military Service: An Analysis Of Enlistment, Reenlistment, And Veterans' Benefit Usage 1991–2005," Economic Inquiry, Western Economic Association International, vol. 48(4), pages 1008-1031, October.
    2. Johnsen, Åshild A. & Finseraas, Henning & Hanson, Torbjørn & Kotsadam, Andreas, 2023. "The malleability of competitive preferences," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 104(C).
    3. Bäckström, Peter, 2020. "Essays on Military Labour Supply in the Era of Voluntary Recruitment," Umeå Economic Studies 965, Umeå University, Department of Economics.
    4. Suman Ghosh & Michael Waldman, 2010. "Standard promotion practices versus up‐or‐out contracts," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 301-325, June.
    5. Stephen L. Mehay & William R. Bowman, 2005. "Marital Status and Productivity: Evidence from Personnel Data," Southern Economic Journal, John Wiley & Sons, vol. 72(1), pages 63-77, July.
    6. Renaud Bellais & Martial Foucault & Jean-Michel Oudot, 2014. "Économie de la défense," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01052607, HAL.
    7. Matthew F. Cancian & Michael W. Klein, 2015. "Military Officer Quality in the All-Volunteer Force," NBER Working Papers 21372, National Bureau of Economic Research, Inc.
    8. Scott E. Carrell & James E. West, 2005. "Optimal compensating wages for military personnel," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 24(4), pages 803-822.
    9. Yew-Kwang Ng, 2008. "Why is the Military Draft Common? Conscription and Increasing Returns," Annals of Economics and Finance, Society for AEF, vol. 9(2), pages 373-384, November.
    10. George A. Akerlof & Rachel E. Kranton, 2005. "Identity and the Economics of Organizations," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 9-32, Winter.
    11. Alberto Bayo-Moriones & Pedro Ortín-à ngel, 2006. "Internal Promotion versus External Recruitment in Industrial Plants in Spain," ILR Review, Cornell University, ILR School, vol. 59(3), pages 451-470, April.
    12. Benjamin, Daniel K. & Thornberg, Christopher, 2007. "Organization and incentives in the age of sail," Explorations in Economic History, Elsevier, vol. 44(2), pages 317-341, April.
    13. John Warner & Sebastian Negrusa, 2005. "Evasion costs and the theory Of conscription," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(2), pages 83-100.
    14. Scott Carrell & Jonathan Zinman, 2014. "In Harm's Way? Payday Loan Access and Military Personnel Performance," The Review of Financial Studies, Society for Financial Studies, vol. 27(9), pages 2805-2840.
    15. Carrell, Scott E., 2007. "The national internal labor market encounters the local labor market: Effects on employee retention," Labour Economics, Elsevier, vol. 14(5), pages 774-787, October.
    16. José Ángel Zúñiga Vicente & José David Vicente Lorente, 2003. "Assessing the Structural Change of Strategic Mobility Determinants Under Hypercompetitive Environments," Working Papers 0302, Departament Empresa, Universitat Autònoma de Barcelona, revised Feb 2003.
    17. Paweł Gola, 2024. "On the Importance of Social Status for Occupational Sorting," The Economic Journal, Royal Economic Society, vol. 134(661), pages 2009-2040.
    18. Bäckström, Peter, 2023. "Empirical Essays on Military Service and the Labour Market," Umeå Economic Studies 1012, Umeå University, Department of Economics.
    19. Alberto Bayo-Moriones & Pedro Ortín-Ángel, 2003. "Internal Promotion Versus External Recruitment: Evidence in Industrial Plants," Working Papers 0303, Departament Empresa, Universitat Autònoma de Barcelona, revised Mar 2003.

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