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The promotion dynamics of American executives

In: Jobs, Training, and Worker Well-being

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  • Christian Belzil
  • Michael Bognanno

Abstract

We formulate static and dynamic empirical models of promotion where the current promotion probability depends on the hierarchical level in the firm, individual human capital, unobserved individual specific attributes, time-varying firm-specific variables, as well as endogenous past promotion histories (in the dynamic version). Within the static versions, we investigate the relative influence of the key determinants of promotions and how these influences vary by hierarchical levels. In the dynamic version of the model, we examine the causal effect of past speed of promotion on promotion outcomes. The model is fit on an eight-year panel of 30,000 American executives employed in more than 300 different firms. The stochastic process generating promotions may be viewed as a series of promotion probabilities which become smaller as an individual moves up in the hierarchy and which are primarily explained by unobserved heterogeneity and promotion opportunities. Firm variables and observed human capital variables (age, tenure, and education) play a surprisingly small role. We also find that, conditional on unobservables, the promotion probability is only enhanced by the speed of promotion achieved in the past (a structural fast track effect) for a subset of the population and is negative for the majority. In general, the magnitude of the individual-specific effect of past speed of promotion is inversely related to schooling, tenure, and hierarchical level.

Suggested Citation

  • Christian Belzil & Michael Bognanno, 2010. "The promotion dynamics of American executives," Research in Labor Economics, in: Solomon W. Polachek & Konstantinos Tatsiramos (ed.), Jobs, Training, and Worker Well-being, volume 30, pages 189-231, Emerald Publishing Ltd.
  • Handle: RePEc:eme:rleczz:s0147-9121(2010)0000030009
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    Citations

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    Cited by:

    1. Michael Bognanno & Eduardo Melero, 2012. "Promotion Signals, Age and Education," DETU Working Papers 1205, Department of Economics, Temple University.
    2. Brösamle, Klaus J & Nordström Skans, Oskar, 2011. "Paths to higher office: evidence from the Swedish Civil Service," Working Paper Series, Center for Labor Studies 2011:17, Uppsala University, Department of Economics.
    3. Elena Pastorino, 2012. "Careers in firms: estimating a model of learning, job assignment, and human capital aquisition," Staff Report 469, Federal Reserve Bank of Minneapolis.
    4. Christian Belzil & Michael Bognanno, 2008. "Promotions, Demotions, Halo Effects, and the Earnings Dynamics of American Executives," Journal of Labor Economics, University of Chicago Press, vol. 26(2), pages 287-310, April.
    5. Michael Waldman, 2012. "Theory and Evidence in Internal Labor Markets," Introductory Chapters, in: Robert Gibbons & John Roberts (ed.), The Handbook of Organizational Economics, Princeton University Press.
    6. Pema, Elda & Mehay, Stephen, 2010. "The role of job assignment and human capital endowments in explaining gender differences in job performance and promotion," Labour Economics, Elsevier, vol. 17(6), pages 998-1009, December.
    7. Kazuaki Okamura, 2011. "The Signalling Role of Promotion in Japan," Discussion Papers 1112, Graduate School of Economics, Kobe University.
    8. Jed DeVaro & Michael Waldman, 2012. "The Signaling Role of Promotions: Further Theory and Empirical Evidence," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 91-147.
    9. Núria Rodríquez-Planas, 2011. "Displacement, Signaling, and Recall Expectations," Working Papers 550, Barcelona Graduate School of Economics.
    10. Pablo Acosta, 2004. "Promotions, State Dependence and Intrafirm Job Mobility: Evidence From Personnel Records," Econometric Society 2004 North American Summer Meetings 585, Econometric Society.
    11. Acosta, Pablo, 2010. "Promotion dynamics the Peter Principle: Incumbents vs. external hires," Labour Economics, Elsevier, vol. 17(6), pages 975-986, December.

    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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