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Job Allocation Rules and Sorting Efficiency: Experimental Outcomes in a Peter Principle Environment

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  • David L. Dickinson
  • Marie Claire Villeval

Abstract

An important issue in personnel economics is the design of efficient job allocation rules. Firms often use promotions both to sort workers across jobs and to provide them with incentives. However, the Peter Principle states that employees' output tends to fall after a promotion. Lazear (2004) suggests that self‐selection may improve job allocation efficiency while preserving incentive effects. We reproduce this Peter Principle in the laboratory and compare the efficiency of a promotion standard with subjects self‐selecting their task. We find no evidence of effort distortion, as predicted by theory. Furthermore, we find that when the Peter Principle is not severe, promotion rules often dominate self‐selection efficiency of task assignment. Results are consistent with imperfect appraisal of transitory ability and a lack of strategic behavior.

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  • David L. Dickinson & Marie Claire Villeval, 2012. "Job Allocation Rules and Sorting Efficiency: Experimental Outcomes in a Peter Principle Environment," Southern Economic Journal, John Wiley & Sons, vol. 78(3), pages 842-859, January.
    • Handle: RePEc:wly:soecon:v:78:y:2012:i:3:p:842-859
    DOI: 10.4284/0038-4038-78.3.842
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    1. Dan Bernhardt, 1995. "Strategic Promotion and Compensation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(2), pages 315-339.
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    Cited by:

    1. Peter Bußwolder & Swetlana Dregert & Peter Letmathe, 2019. "Consequences of Unfair Job Promotions in Organizations," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 71(1), pages 3-26, February.
    2. Ďuriník, Michal & Morita, Hodaka & Servátka, Maroš & Zhang, Le, 2023. "Promotions and Group Identity," MPRA Paper 119389, University Library of Munich, Germany.

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