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The signaling role of promotions: Further theory and empirical evidence

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Author Info
DeVaro, Jed
Waldman, Michael

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Abstract

An extensive theoretical literature has developed that investigates the role of promotions as a signal of worker ability. There have been no tests, however, of the empirical validity of this idea. In this paper we develop the theory in a manner that allows us to generate testable predictions, and then investigate the validity of these predictions using a longitudinal data set that contains detailed information concerning the internal-labor-market history of a medium sized firm in the financial services industry. Our results support the notion that signaling is both a statistically significant and economically significant factor in promotion decisions. The paper also contributes to the extensive literature on the role of education as a labor-market signal.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1550.

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Date of creation: Dec 2006
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Handle: RePEc:pra:mprapa:1550

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Keywords: signaling theory promotions asymmetric information

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Find related papers by JEL classification:
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kameshwari Shankar & Suman Ghosh, 2005. "Favorable Selection in the Labor Market: A Theory of Worker Mobility in R&D Intensive Industries," Working Papers 05006, Department of Economics, College of Business, Florida Atlantic University. [Downloadable!]
  2. Joshua C. Pinkston, 2006. "A Model of Asymmetric Employer Learning With Testable Implications," Working Papers 390, U.S. Bureau of Labor Statistics. [Downloadable!]
  3. Heski Bar-Isaac & Ian Jewitt & Clare Leaver, 2007. "Information and Human Capital Managment," Working Papers 07-29, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
    Other versions:
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