Job Allocation Rules and Sorting Efficiency: Experimental Outcomes in a Peter Principle Environment
AbstractAn 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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Date of creation: 2012
Date of revision:
Publication status: Published, Southern Economic Journal, 2012, 78, 3, pp. 842-859
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Promotion; Peter Principle; Sorting; Experiment;
Other versions of this item:
- David L. Dickinson & Marie Claire Villeval, 2012. "Job Allocation Rules and Sorting Efficiency: Experimental Outcomes in a Peter Principle Environment," Southern Economic Journal, Southern Economic Association, vol. 78(3), pages 842-859, January.
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- 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-2012-02-27 (All new papers)
- NEP-CBE-2012-02-27 (Cognitive & Behavioural Economics)
- NEP-CTA-2012-02-27 (Contract Theory & Applications)
- NEP-EXP-2012-02-27 (Experimental Economics)
- NEP-HRM-2012-02-27 (Human Capital & Human Resource Management)
- NEP-LAB-2012-02-27 (Labour Economics)
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