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The Signalling Role of Promotion in Japan

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  • Kazuaki Okamura

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    (Department of Economics and Social Sciences, Faculty of Humanities and Economics, Kochi University)

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    Abstract

    Under asymmetric information conditions regarding worker productivity between current and prospective employers, a worker's promotion signals his/her productivity. In this Paper, we tested the signalling role of promotion, using Japanese micro-level data. We found that among lower-level positions, promotion seems to signal a worker's ability, and both the business cycle and foreign-capital ratio of his/her company significantly strengthen this effects. These results suggest that external labour market conditions (i.e. asymmetric information regarding a worker's abilities between a current and prospective employer) affect the economic differences among workers in the internal labour market.

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    File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2011/1112.pdf
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    Bibliographic Info

    Paper provided by Graduate School of Economics, Kobe University in its series Discussion Papers with number 1112.

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    Length: 20pages
    Date of creation: Aug 2011
    Date of revision:
    Handle: RePEc:koe:wpaper:1112

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    Web page: http://www.econ.kobe-u.ac.jp
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    Keywords: Strategically delayed promotion; Signalling; Wage growth; Japan.;

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    1. Robert Gibbons & Lawrence Katz, 1989. "Layoffs and Lemons," NBER Working Papers 2968, National Bureau of Economic Research, Inc.
    2. Joseph G. Altonji & Charles R. Pierret, 1997. "Employer Learning and Statistical Discrimination," NBER Working Papers 6279, National Bureau of Economic Research, Inc.
    3. Christian Belzil & Michael Bognanno, 2004. "The Promotion Dynamics of American Executives," Working Papers 0404, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
    4. Ishida, Junichiro, 2004. "Signaling and strategically delayed promotion," Labour Economics, Elsevier, vol. 11(6), pages 687-700, December.
    5. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
    6. Francine Blau & Jed DeVaro, 2006. "New Evidence on Gender Differences in Promotion Rates: An Empirical Analysis of a Sample of New Hires," Working Papers 891, Princeton University, Department of Economics, Industrial Relations Section..
    7. Henry S. Farber & Robert Gibbons, 1994. "Learning and Wage Dynamics," Working Papers 707, Princeton University, Department of Economics, Industrial Relations Section..
    8. Antonio Dias da Silva & Bas van der Klaauw, 2006. "Wage Dynamics and Promotions inside and between Firms," Tinbergen Institute Discussion Papers 06-084/3, Tinbergen Institute.
    9. Bernhardt, Dan, 1995. "Strategic Promotion and Compensation," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 315-39, April.
    10. McCue, Kristin, 1996. "Promotions and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 14(2), pages 175-209, April.
    11. Booth, Alison L. & Francesconi, Marco & Frank, Jeff, 2003. "A sticky floors model of promotion, pay, and gender," European Economic Review, Elsevier, vol. 47(2), pages 295-322, April.
    12. Ricart i Costa, Joan E, 1988. "Managerial Task Assignment and Promotions," Econometrica, Econometric Society, vol. 56(2), pages 449-66, March.
    13. Pablo Acosta, 2004. "Promotions, State Dependence and Intrafirm Job Mobility: Evidence From Personnel Records," Econometric Society 2004 North American Summer Meetings 585, Econometric Society.
    14. DeVaro, Jed & Waldman, Michael, 2006. "The signaling role of promotions: Further theory and empirical evidence," MPRA Paper 1550, University Library of Munich, Germany.
    15. Prendergast, Canice, 1992. "Career development and specific human capital collection," Journal of the Japanese and International Economies, Elsevier, vol. 6(3), pages 207-227, September.
    16. Ariga,Kenn & Brunello,Giorgio & Ohkusa,Yasushi, 2000. "Internal Labour Markets in Japan," Cambridge Books, Cambridge University Press, number 9780521642408, April.
    17. Uta Schönberg, 2007. "Testing for Asymmetric Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 651-691.
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