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Promotion Determinants in Corporate Hierarchies: An Examination of Fast Tracks and Functional Area

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  • Belzil, Christian

    ()
    (Ecole Polytechnique, Paris)

  • Bognanno, Michael L.

    ()
    (Temple University)

  • Poinas, François

    ()
    (Toulouse School of Economics)

Abstract

This article estimates a dynamic reduced-form model of intra-firm promotions using an employer-employee panel of over 300 of the largest corporations in the U.S. in the period from 1981 to 1988. The estimation conditions on unobserved individual heterogeneity and allows for both an endogenous initial condition and sample attrition linked to individual heterogeneity in demonstrating the relative importance of variables that influence promotion. The role of the executive's functional area in promotion is considered along with the existence and source of promotion fast tracks. We find that while the principal determinant of promotions is unobserved individual heterogeneity, functional area has a high explanatory power, resulting in promotion probabilities that differ by functional area for executives at the same reporting level and firm. No evidence is found that an executive's recent speed of advancement in pay grade has a causal impact on in- sample promotions after conditioning on the executive's career speed of advancement. For high-level executives, fast tracks appear to result from heterogeneity in persistent individual characteristics, not from an inherent benefit in recent advancement itself.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6948.

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Length: 35 pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6948

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Keywords: functional area; fast track; promotion; dynamic discrete choice;

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  1. Treble, John & van Gameren, Edwin & Bridges, Sarah & Barmby, Tim, 2001. "The internal economics of the firm: further evidence from personnel data," Labour Economics, Elsevier, Elsevier, vol. 8(5), pages 531-552, December.
  2. Jeffrey M Wooldridge, 2002. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP18/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  3. Jed DeVaro & Michael Waldman, 2012. "The Signaling Role of Promotions: Further Theory and Empirical Evidence," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 30(1), pages 91 - 147.
  4. 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.
  5. Seltzer, Andrew & Merrett, David T, 2000. "Personnel Policies at the Union Bank of Australia: Evidence from the 1888-1900 Entry Cohorts," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 18(4), pages 573-613, October.
  6. Michael Waldman, 1983. "Job Assignments, Signalling nad Efficiency," UCLA Economics Working Papers, UCLA Department of Economics 286, UCLA Department of Economics.
  7. Michael Bognanno & Eduardo Melero, 2012. "Promotion Signals, Age and Education," DETU Working Papers, Department of Economics, Temple University 1205, Department of Economics, Temple University.
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