External Recruitment as an Incentive Device
AbstractExternal recruitment is often believed to be harmful in that it trades off the need for outside talents with the incentives of inside workers. This article shows that, even from an incentive viewpoint, external recruitment has its powerful function. Specifically, if promotion is based on relative performance, then negative activities (sabotages) are a valuable instrument for competition. This results in inefficiency of the firm. External recruitment, by reducing the marginal return of negative effort relative to that of productive effort, restores the incentives in productive activity. Even without sabotage concern, external recruitment can avoid shirking equilibrium or prevent workers' collusion.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Labor Economics.
Volume (Year): 23 (2005)
Issue (Month): 2 (April)
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Web page: http://www.journals.uchicago.edu/JOLE/
Other versions of this item:
- Kong-Pin Chen, 2004. "External Recruitment as an incentive Device," Econometric Society 2004 North American Summer Meetings 54, Econometric Society.
- Kong-Pin Chen, 2004. "External Recruitment as an Incentive Device," Econometric Society 2004 Far Eastern Meetings 514, Econometric Society.
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
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