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The Hidden Effect of Meritocratic Promotion Procedure: Experimental Evidence

Author

Listed:
  • Emilien Prost
  • Gaye del Lo

Abstract

The aim of this experimental paper is to show how the willingness of an employee to accept inequality of wages between him and his executive will depend on the ability on which the executive is evaluated when he is promoted. This willingness to accept inequality is captured by the minimum wage enough to incentivize to work for his executive. We show that selecting an executive on his ability to outperform his employee at his own task will be counterproductive to make employee accepting inequality of wages. We argue that the efficiency of “merit-based” promotion procedure may be challenged by this result.

Suggested Citation

  • Emilien Prost & Gaye del Lo, 2019. "The Hidden Effect of Meritocratic Promotion Procedure: Experimental Evidence," Working Papers of BETA 2019-21, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    • Handle: RePEc:ulp:sbbeta:2019-21
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    File URL: http://beta.u-strasbg.fr/WP/2019/2019-21.pdf
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    More about this item

    Keywords

    Legitimacy; leadership; tournament; contract theory; moral hazard; personnel economics.;
    All these keywords.

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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