A Theory of Compensation and Personnel Policy in Hierarchical Organizations with Application to the United States Military
A large literature attempts to explain compensation and personnel policies in large organizations. Three features of the U.S. military system flat rank spreads in pay, a relatively generous pension, and heavy reliance on up-or-out promotions are at variance with common practices in large civilian organizations. This article develops a model of individual decision making in a large, hierarchical organization and uses the model to explain these apparent puzzles. The lack of lateral entry and heterogeneity in entrants' abilities and preferences for military service play key roles in the observed policies. Copyright 2001 by University of Chicago Press.
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- Jonathan S. Leonard, 1990. "Executive Pay and Firm Performance," ILR Review, Cornell University, ILR School, vol. 43(3), pages 13, April.
- Saul Pleeter & John T. Warner, 2001. "The Personal Discount Rate: Evidence from Military Downsizing Programs," American Economic Review, American Economic Association, vol. 91(1), pages 33-53, March.
- Gary S. Becker, 1975. "Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education, Second Edition," NBER Books, National Bureau of Economic Research, Inc, number beck75-1, December.
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