Wage Structure and the Incentive Effect of Promotions
AbstractThis paper studies wage structure characteristics and their incentive effects within one firm. Based on personnel records and an employee survey, we provide evidence that wages are attached to jobs and that promotions play a dominant role as a wage determinant. We furthermore show that a promotion affects both intrinsic and extrinsic motivation significantly, though in two different ways: An expected promotion increases extrinsic motivation whereas intrinsic motivation is highest subsequent to a realized promotion. The relationship between extrinsic motivation and expected promotions implies that promotions have a clear incentive effect, consistent with a key – not yet tested – prediction of the tournament model. This discussion paper has resulted in a publication in Kyklos International Review for Social Science , 2006, 59(3), 441-59.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 04-107/3.
Date of creation: 23 Sep 2004
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Web page: http://www.tinbergen.nl
promotions; incentives; tournament model; internal labor market; extrinsic motivation; intrinsic motivation;
Other versions of this item:
- Marco Van Herpen & Kees Cools & Mirjam Van Praag, 2006. "Wage Structure and the Incentive Effects of Promotions," Kyklos, Wiley Blackwell, vol. 59(3), pages 441-459, 08.
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- M51 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Firm Employment Decisions; Promotions
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-10-21 (All new papers)
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- Becchetti, Leonardo & Castriota, Stefano, 2010. "Wage differentials in social enterprises," AICCON Working Papers 68-2010, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
- Marco Herpen & Mirjam Praag & Kees Cools, 2005. "The Effects of Performance Measurement and Compensation on Motivation: An Empirical Study," De Economist, Springer, vol. 153(3), pages 303-329, 09.
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