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On the Job Screening, up or out Rules, and Firm Growth


  • Brendan O'Flaherty
  • Aloysius Siow


This paper uses on-the-job screening to derive a stochastic and dynamic model of hiring, promotion, and dismissal policies, and their impact on total firm employment and output. The model provides an explanation of the up-or-out rule observed in many organizations. It also provides an explanation for a cost-of-adjustment mechanism for the stock of human capital in a firm.

Suggested Citation

  • Brendan O'Flaherty & Aloysius Siow, 1992. "On the Job Screening, up or out Rules, and Firm Growth," Canadian Journal of Economics, Canadian Economics Association, vol. 25(2), pages 346-368, May.
  • Handle: RePEc:cje:issued:v:25:y:1992:i:2:p:346-68

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    References listed on IDEAS

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    Cited by:

    1. James B. Rebitzer & Lowell J. Taylor, 2007. "When Knowledge Is an Asset: Explaining the Organizational Structure of Large Law Firms," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 201-229.
    2. Abe, Naohito & Gaston, Noel & Kubo, Katsuyuki, 2005. "Executive pay in Japan: the role of bank-appointed monitors and the Main Bank relationship," Japan and the World Economy, Elsevier, vol. 17(3), pages 371-394, August.
    3. Barlevy, Gadi & Neal, Derek, 2016. "Allocating Effort and Talent in Professional Labor Markets," Working Paper Series WP-2016-3, Federal Reserve Bank of Chicago.
    4. Demougin, Dominique & Siow, Aloysius, 1996. "Managerial husbandry and the dynamics of ongoing hierarchies," European Economic Review, Elsevier, vol. 40(7), pages 1483-1499, August.
    5. Braz Camargo & Elena Pastorino, 2016. "Learning-by-Employing: The Value of Commitment under Uncertainty," Journal of Labor Economics, University of Chicago Press, vol. 34(3), pages 581-620.
    6. Braz Camargo & Elena Pastorino, 2012. "Learning-by-employing: the value of commitment under uncertainty," Staff Report 475, Federal Reserve Bank of Minneapolis.
    7. Black, Dan A. & Loewenstein, Mark A., 1997. "Dismissals and match-specific rents," Labour Economics, Elsevier, vol. 4(4), pages 325-340, December.
    8. Cowen, Tyler & Glazer, Amihai, 2007. "Esteem and ignorance," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 373-383, July.
    9. Jovanovic, Boyan & Nyarko, Yaw, 1997. "Stepping-stone mobility," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 46(1), pages 289-325, June.
    10. Chia-Hui Chen & Junichiro Ishida, 2015. "A Tenure-Clock Problem," ISER Discussion Paper 0919, Institute of Social and Economic Research, Osaka University.
    11. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    12. Chia-Hui Chen & Junichiro Ishida, 2017. "Dynamic Performance Evaluation with Deadlines: The Role of Commitment," ISER Discussion Paper 1015, Institute of Social and Economic Research, Osaka University.
    13. Siow, Aloysius & Zhu, Xiaodong, 1997. "The creation of plants and firms," Journal of Economic Dynamics and Control, Elsevier, vol. 22(1), pages 141-178, November.
    14. Sengupta, Sarbajit, 2004. "Delegating recruitment under asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1327-1347, November.
    15. Robert Gibbons, 1996. "Incentives and Careers in Organizations," NBER Working Papers 5705, National Bureau of Economic Research, Inc.
    16. Alexander K. Koch & Julia Nafziger, 2012. "Job Assignments under Moral Hazard: The Peter Principle Revisited," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(4), pages 1029-1059, December.

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