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Career Concerns and Belief Precision about Talent

Author

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  • Frédéric Loss
  • Antoine Renucci

Abstract

In this paper, we study effort incentives in the labor market when talent is learned over time. We build a career concerns model in which agents can be promoted. We show that effort can increase in the precision of beliefs about talent, unlike the result obtained in the seminal paper of Holmström (1999), but in line with Miklós-Thal and Ullrich (2015). Characterizing the impact of belief precision on incentives through the wage function allows us to identify a “front-runner†effect. Agents who will be promoted if they keep their reputation are more likely than others to exert more effort when belief precision is higher. This is in contrast to Miklós-Thal and Ullrich (2015) who find a symmetric relation around the threshold for being promoted.

Suggested Citation

  • Frédéric Loss & Antoine Renucci, 2020. "Career Concerns and Belief Precision about Talent," Annals of Economics and Statistics, GENES, issue 139, pages 87-104.
  • Handle: RePEc:adr:anecst:y:2020:i:139:p:87-104
    DOI: 10.15609/annaeconstat2009.139.0087
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    More about this item

    Keywords

    Promotion; Incentives; Reputation; Career Concerns; Belief Precision; Talent;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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