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Careers and Wage Growth within Large Firms

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Author Info

  • Lima, Francisco

    ()
    (Universidade Nova de Lisboa)

  • Pereira, Pedro T.

    ()
    (University of Madeira)

Abstract

The relationship between the worker’s career path and wage growth is studied using a longitudinal sample of large firms. The econometric analysis shows that promoted workers receive a positive wage premium even if they stay in the same job level. Demotions are associated with negative wage premiums. The wage-career dynamics generates a U-shape to the wage premiums for promotions over the hierarchical ladder. In the context of the model discussed, this shape suggests a stronger learning and/or human capital accumulation effect at the bottom of the hierarchy and a stronger job assignment effect at the top.

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File URL: http://ftp.iza.org/dp336.pdf
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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 336.

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Length: 51 pages
Date of creation: Jul 2001
Date of revision:
Publication status: published in: International Journal of Manpower, 2003, 7 (24), 812-835
Handle: RePEc:iza:izadps:dp336

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Related research

Keywords: wage growth; promotions; Careers;

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References

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  1. Farber, Henry S & Gibbons, Robert, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(4), pages 1007-47, November.
  2. Milgrom, Paul & Oster, Sharon, 1987. "Job Discrimination, Market Forces, and the Invisibility Hypothesis," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 102(3), pages 453-76, August.
  3. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, Econometric Society, vol. 67(2), pages 251-334, March.
  4. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  5. Ricart i Costa, Joan E, 1988. "Managerial Task Assignment and Promotions," Econometrica, Econometric Society, Econometric Society, vol. 56(2), pages 449-66, March.
  6. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  7. Pierre-Andre Chiappori & Bernard Salanie & Julie Valentin, 1999. "Early Starters versus Late Beginners," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 107(4), pages 731-760, August.
  8. Sherwin Rosen, 1985. "Prizes and Incentives in Elimination Tournaments," NBER Working Papers 1668, National Bureau of Economic Research, Inc.
  9. Robert Gibbons, 1996. "Incentives and Careers in Organizations," NBER Working Papers 5705, National Bureau of Economic Research, Inc.
  10. Manove, Michael, 1997. "Job Responsibility, Pay and Promotion," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(440), pages 85-103, January.
  11. Michael R. Pergamit & Jonathan R. Veum, 1999. "What is a promotion?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 52(4), pages 581-601, July.
  12. Kahn, Charles & Huberman, Gur, 1988. "Two-sided Uncertainty and "Up-or-Out" Contracts," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 6(4), pages 423-44, October.
  13. Robert Gibbons & Michael Waldman, 1999. "A Theory Of Wage And Promotion Dynamics Inside Firms," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(4), pages 1321-1358, November.
  14. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(5), pages 972-90, October.
  15. Dan Bernhardt & David Scoones, 1991. "Promotion: Turnover and Preemptive Wage Offers," Working Papers, Queen's University, Department of Economics 817, Queen's University, Department of Economics.
  16. McCue, Kristin, 1996. "Promotions and Wage Growth," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 14(2), pages 175-209, April.
  17. Sattinger, Michael, 1975. "Comparative Advantage and the Distributions of Earnings and Abilities," Econometrica, Econometric Society, Econometric Society, vol. 43(3), pages 455-68, May.
  18. Eriksson, Tor, 1999. "Executive Compensation and Tournament Theory: Empirical Tests on Danish Data," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(2), pages 262-80, April.
  19. Edward P. Lazear, 1999. "Personnel Economics: Past Lessons and Future Directions," NBER Working Papers 6957, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Mário Centeno & Manuel Coutinho Pereira, 2005. "Wage determination in general government in Portugal," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department, Banco de Portugal, Economics and Research Department.
  2. Mion, Giordano & Opromolla, Luca David, 2013. "Managers’ mobility, trade performance, and wages," Working Paper Series, European Central Bank 1596, European Central Bank.
  3. Bas Klaauw & António Dias da Silva, 2011. "Wage dynamics and promotions inside and between firms," Journal of Population Economics, Springer, Springer, vol. 24(4), pages 1513-1548, October.
  4. Carson, Paula Phillips & Carson, Kerry David, 2007. "Demystifying demotion: A look at the psychological and economic consequences on the demotee," Business Horizons, Elsevier, Elsevier, vol. 50(6), pages 455-466.
  5. Grund, Christian, 2002. "The Wage Policy of Firms – Comparative Evidence for the U.S. and Germany from Personnel Data," IZA Discussion Papers 605, Institute for the Study of Labor (IZA).
  6. Valerie Smeets & Michael Waldman & Frederic Warzynski, 2013. "Performance, Career Dynamics, and Span of Control," Economics Working Papers, School of Economics and Management, University of Aarhus 2013-02, School of Economics and Management, University of Aarhus.
  7. Ferreira, Priscila, 2009. "The determinants of promotions and firm separations," ISER Working Paper Series 2009-11, Institute for Social and Economic Research.
  8. Waldman, Michael, 2007. "Theory and evidence in internal labor markets," MPRA Paper 5113, University Library of Munich, Germany.
  9. repec:dgr:uvatin:2006084 is not listed on IDEAS
  10. Machado, C. Sofia & Portela, Miguel, 2013. "Age and Opportunities for Promotion," IZA Discussion Papers 7784, Institute for the Study of Labor (IZA).

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