Job Transfers and Incentives in Complex Organizations: Thwarting the Ratchet Effect
Many complex organizations, such as planned Soviet enterprises and the U.S. military, routinely transfer employees between jobs. Since this sacrifices job-specific human capital, the practice is puzzling. This article shows that regular job transfers may be part of an optimal incentive scheme in organizations plagued by the ratchet effect. The ratchet effect arises when an employer is uncertain as to the productivity of the various positions or jobs within an organization. Workers in highly productive jobs then have an incentive to disguise the productivity of their jobs by expending low effort and producing low output. This avoids having the employer construct more demanding remuneration schemes once the high productivity of a job becomes known. Job transfers break the link between current performance and future incentive schemes, and hence remove the incentive-stifling implications of the ratchet effect. This article examines the tradeoff between providing more effective incentives via job transfers and the accompanying sacrifice of job-specific human capital, establishes conditions under which job transfers are optimal, and develops comparative static results.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 18 (1987)
Issue (Month): 2 (Summer)
|Contact details of provider:|| Web page: http://www.rje.org |
|Order Information:||Web: https://editorialexpress.com/cgi-bin/rje_online.cgi|
When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:18:y:1987:i:summer:p:275-286. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.