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Allocating Effort and Talent in Professional Labor Markets

Author

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  • Gadi Barlevy
  • Derek Neal

Abstract

In many professional service firms, new associates work long hours while competing in up-or-out promotion contests. Our model explains why. We argue that the productivity of skilled partners in professional service firms (e.g., law, consulting, investment banking, and public accounting) is quite large relative to the productivity of their peers who are competent and experienced but not well suited to the partner role. Therefore, these firms adopt personnel policies that facilitate the identification of new partners. In our model, both heavy workloads and up-or-out rules serve this purpose.

Suggested Citation

  • Gadi Barlevy & Derek Neal, 2019. "Allocating Effort and Talent in Professional Labor Markets," Journal of Labor Economics, University of Chicago Press, vol. 37(1), pages 187-246.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/698899
    DOI: 10.1086/698899
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    Cited by:

    1. Radoslawa Nikolowa & Daniel Ferreira, 2018. "How to Sell Jobs," Working Papers 846, Queen Mary University of London, School of Economics and Finance.
    2. Alexander Bick & Adam Blandin & Richard Rogerson, 2022. "Hours and Wages," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(3), pages 1901-1962.
    3. Karin Mayr‐Dorn, 2023. "Adverse Selection, Learning, And Competitive Search," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(1), pages 129-153, February.
    4. Fudenberg, Drew & Georgiadis, George & Rayo, Luis, 2021. "Working to learn," Journal of Economic Theory, Elsevier, vol. 197(C).
    5. Ron Kaniel & Dmitry Orlov, 2025. "Intermediated Asymmetric Information, Compensation, and Career Prospects," American Economic Review, American Economic Association, vol. 115(10), pages 3638-3674, October.
    6. Michael Dinerstein & Isaac M. Opper, 2022. "Screening with Multitasking," CESifo Working Paper Series 9869, CESifo.
    7. Ferreira, Daniel & Nikolowa, Radoslawa, 2024. "Prestige, promotion, and pay," LSE Research Online Documents on Economics 118369, London School of Economics and Political Science, LSE Library.
    8. Dana Foarta & Takuo Sugaya, 2021. "The management of talent: Optimal contracting for selection and incentives," RAND Journal of Economics, RAND Corporation, vol. 52(1), pages 49-77, March.
    9. Daniel Ferreira & Radoslawa Nikolowa, 2024. "Prestige, Promotion, and Pay," Journal of Finance, American Finance Association, vol. 79(1), pages 505-540, February.

    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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