Threat of Dismissal: Incentive or Sorting?
AbstractMany people are fired from their jobs for poor performance. However, it is difficult to distinguish whether they are fired because they are not well suited for their job (sorting explanation) or because the firms are trying to provide incentives for effort (incentive explanation). This article develops a dynamic incentive model of dismissal and proposes a methodology to distinguish between these two explanations. The methodology is based on learning-by-doing and changes in the slope of dismissal probability with respect to tenure. Using personnel data from a large U.S. company, this study finds significant evidence for the incentive explanation.
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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): 4 (October)
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Web page: http://www.journals.uchicago.edu/JOLE/
Other versions of this item:
- Illoong Kwon, 2004. "Threat of Dismissal: Incentive or Sorting?," Econometric Society 2004 North American Summer Meetings 114, Econometric Society.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
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- Pouliakas, Konstantinos & Theodossiou, Ioannis, 2012. "Rewarding carrots and crippling sticks: Eliciting employee preferences for the optimal incentive design," Journal of Economic Psychology, Elsevier, vol. 33(6), pages 1247-1265.
- Pouliakas, Konstantinos & Theodossiou, Ioannis, 2009. "Rewarding Carrots & Crippling Sticks: Eliciting Employee Preferences for the Optimal Incentive Mix in Europe," MPRA Paper 14167, University Library of Munich, Germany.
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EIEF Working Papers Series
0901, Einaudi Institute for Economics and Finance (EIEF), revised Feb 2009.
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- Oriana Bandiera & Andrea Prat & Luigi Guiso & Raffaella Sadun, 2011. "Matching Firms, Managers and Incentives," NBER Working Papers 16691, National Bureau of Economic Research, Inc.
- Oriana Bandiera & Luigi Guiso & Andrea Prat & Raffaella Sadun, 2009. "Matching Firms, Managers and Incentives," Economics Working Papers ECO2009/14, European University Institute.
- Oriana Bandiera & Luigi Guiso & Andrea Prat & Raffaella Sadun, 2010. "Matching Firms, Managers, and Incentives," Harvard Business School Working Papers 10-073, Harvard Business School, revised Aug 2011.
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