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Careers and Wage Growth within Large Firms

Author

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  • 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.

Suggested Citation

  • Lima, Francisco & Pereira, Pedro T., 2001. "Careers and Wage Growth within Large Firms," IZA Discussion Papers 336, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp336
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    References listed on IDEAS

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    Cited by:

    1. Francesca Sgobbi & Fátima Suleman, 2015. "The Value of Transferable Skills," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(4), pages 378-399, September.
    2. Sophie Hennekam & Subramaniam Ananthram, 2020. "Involuntary and voluntary demotion: employee reactions and outcomes," Post-Print hal-03232764, HAL.
    3. C. Sofia Machado & Miguel Portela, 2011. "Age and opportunities for promotion," NIPE Working Papers 03/2011, NIPE - Universidade do Minho.
    4. Grund, Christian, 2002. "The Wage Policy of Firms – Comparative Evidence for the U.S. and Germany from Personnel Data," IZA Discussion Papers 605, Institute of Labor Economics (IZA).
    5. Ferreira, Priscila, 2009. "The determinants of promotions and firm separations," ISER Working Paper Series 2009-11, Institute for Social and Economic Research.
    6. Mion, Giordano & Opromolla, Luca David, 2014. "Managers' mobility, trade performance, and wages," Journal of International Economics, Elsevier, vol. 94(1), pages 85-101.
    7. Mario Bossler & Philipp Grunau, 2020. "Asymmetric information in external versus internal promotions," Empirical Economics, Springer, vol. 59(6), pages 2977-2998, December.
    8. Michael Waldman, 2012. "Theory and Evidence in Internal LaborMarkets [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    9. Manuel Coutinho Pereira & Mário Centeno, 2005. "Wage determination in general government in Portugal," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    10. Fernandes, Ana P. & Ferreira, Priscila & Alan Winters, L., 2014. "Firm entry deregulation, competition and returns to education and skill," European Economic Review, Elsevier, vol. 70(C), pages 210-230.
    11. Bas Klaauw & António Dias da Silva, 2011. "Wage dynamics and promotions inside and between firms," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(4), pages 1513-1548, October.
    12. Pedro S. Martins, 2015. "The Diversity of Personnel Practices and Firm Performance," Working Papers 62, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    13. Valerie Smeets & Michael Waldman & Frederic Warzynski, 2019. "Performance, Career Dynamics, and Span of Control," Journal of Labor Economics, University of Chicago Press, vol. 37(4), pages 1183-1213.
    14. Carson, Paula Phillips & Carson, Kerry David, 2007. "Demystifying demotion: A look at the psychological and economic consequences on the demotee," Business Horizons, Elsevier, vol. 50(6), pages 455-466.

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    More about this item

    Keywords

    wage growth; promotions; Careers;
    All these keywords.

    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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