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Job Responsibility, Pay and Promotion

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  • Manove, Michael

Abstract

How are pay and promotion prospects related to job responsibility? A job entails responsibility to the extent that the value of the job outcome is sensitive to the worker's input of effort. In the author's model, an employer uses termination contracts to elicit effort from workers. The optimal wage increases with responsibility. The author shows that the employer can reduce incentive costs by structuring a job ladder and offering workers a self-enforcing prospect of promotion. In fact, the employers will choose to pay differentiated wages to identical workers in identical jobs, promoting workers from the lower-paying to the higher-paying positions as vacancies occur. Copyright 1997 by Royal Economic Society.

Suggested Citation

  • Manove, Michael, 1997. "Job Responsibility, Pay and Promotion," Economic Journal, Royal Economic Society, vol. 107(440), pages 85-103, January.
  • Handle: RePEc:ecj:econjl:v:107:y:1997:i:440:p:85-103
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    Cited by:

    1. Lima, Francisco & Pereira, Pedro T., 2001. "Careers and Wage Growth within Large Firms," IZA Discussion Papers 336, Institute for the Study of Labor (IZA).
    2. Björn Bartling & Urs Fischbacher, 2012. "Shifting the Blame: On Delegation and Responsibility," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 67-87.
    3. Dirk Sliwka, 2006. "On the Notion of Responsibility in Organizations," Journal of Law, Economics, and Organization, Oxford University Press, vol. 22(2), pages 523-547, October.
    4. Bas Klaauw & António Dias da Silva, 2011. "Wage dynamics and promotions inside and between firms," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(4), pages 1513-1548, October.
    5. C. Sofia Machado & Miguel Portela, 2011. "Age and opportunities for promotion," NIPE Working Papers 03/2011, NIPE - Universidade do Minho.
    6. repec:eee:labchp:v:3:y:1999:i:pb:p:2291-2372 is not listed on IDEAS
    7. Lima, Francisco, 2000. "Internal labour markets: a case study," FEUNL Working Paper Series wp378, Universidade Nova de Lisboa, Faculdade de Economia.

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