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Promotion Policy and Firm Size

Author

Listed:
  • Ori Zax

    (Tel-Hai Academic College)

Abstract

In contrast to the predictions of conventional economic theory, it is well documented that similar workers receive wages positively correlated with the size of the firm employing them. To explain these findings we augment the Waldman (1984) framework by adding a size variable and construct a dynamic model of promotion and obtain an equilibrium with a positive correlation between firm size and wages.

Suggested Citation

  • Ori Zax, 2012. "Promotion Policy and Firm Size," Economics Bulletin, AccessEcon, vol. 32(4), pages 3347-3356.
    • Handle: RePEc:ebl:ecbull:eb-12-00773
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I4-P322.pdf
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    References listed on IDEAS

    as
    1. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
    2. Thomas Cooley & Ramon Marimon & Vincenzo Quadrini, 2004. "Aggregate Consequences of Limited Contract Enforceability," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 817-847, August.
    3. Paolo Angelini & Andrea Generale, 2008. "On the Evolution of Firm Size Distributions," American Economic Review, American Economic Association, vol. 98(1), pages 426-438, March.
    4. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8grh35j2 is not listed on IDEAS
    5. Michael Waldman, 1984. "Worker Allocation, Hierarchies and the Wage Distribution," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(1), pages 95-109.
    6. Luís M B Cabral & José Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, vol. 93(4), pages 1075-1090, September.
    7. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
    8. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
    9. Kenneth R. Troske & Kimberly Bayard, 1999. "Examining the Employer-Size Wage Premium in the Manufacturing, Retail Trade, and Service Industries Using Employer-Employee Matched Data," American Economic Review, American Economic Association, vol. 89(2), pages 99-103, May.
    10. repec:hal:spmain:info:hdl:2441/dc0ckec3fcb29ms985085gkbp is not listed on IDEAS
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    Citations

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    Cited by:

    1. David Wettstein & Ori Zax, 2018. "Promotion Policies of Workers who Observe their Ability," Economics Bulletin, AccessEcon, vol. 38(4), pages 2509-2514.
    2. Ori Zax, 2017. "Promotion Policies at Different Firms," Economics Bulletin, AccessEcon, vol. 37(2), pages 1045-1054.
    3. Ori Zax, 2020. "Human capital acquisition as a competitive response to the promotion distortion," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 496-509, July.

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    More about this item

    Keywords

    Firm size and wages; promotion decisions;

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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