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Career Concerns with Coarse Information

  • Alessandro Bonatti
  • Johannes Horner

This paper develops a model of career concerns. The worker's skill is revealed through output, wage is based on expected output, and so on assessed ability. Specifically, effort increases the probability that a skilled worker achieves a one-time breakthrough. Effort levels at different times are strategic substitutes. Equilibrium effort (and, if marginal cost is convex, wage) is single-peaked with seniority. The agent works too little, too late. Both delay and underprovision of effort worsen if effort is observable. If the firm commits to wages but faces competition, the optimal contract features piecewise constant wages as well as severance pay.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 786969000000000342.

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Date of creation: 09 Jan 2012
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Handle: RePEc:cla:levarc:786969000000000342
Contact details of provider: Web page: http://www.dklevine.com/

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  1. Ulrich Hege & Dirk Bergemann, 2005. "The Financing of Innovation: Learning and Stopping," Post-Print hal-00459926, HAL.
  2. Robert Gibbons & Kevin J. Murphy, 1991. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," NBER Working Papers 3792, National Bureau of Economic Research, Inc.
  3. Suman Ghosh & Michael Waldman, 2006. "Standard Promotion Practices Versus Up-Or-Out Contracts," Working Papers 06007, Department of Economics, College of Business, Florida Atlantic University.
  4. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The economics of career concerns: part 2 :application to missions and accountability of government agencies," ULB Institutional Repository 2013/9641, ULB -- Universite Libre de Bruxelles.
  5. Steven Tadelis & Jonathan Levin, 2004. "Profit Sharing and the Role of Professional Partnerships," 2004 Meeting Papers 156, Society for Economic Dynamics.
  6. Suman Ghosh & Michael Waldman, 2004. "Standard Promotion Practices vs Up-Or-Out Contracts," Royal Economic Society Annual Conference 2004 132, Royal Economic Society.
  7. Alan Morrison & William J. Wilhelm, Jr., 2003. "Partnership Firms, Reputation and Human Capital," OFRC Working Papers Series 2003fe02, Oxford Financial Research Centre.
  8. Landers, Renee M & Rebitzer, James B & Taylor, Lowell J, 1996. "Rat Race Redux: Adverse Selection in the Determination of Work Hours in Law Firms," American Economic Review, American Economic Association, vol. 86(3), pages 329-48, June.
  9. Heski Bar-Isaac, 2003. "Reputation and Survival: Learning in a Dynamic Signalling Model," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 231-251.
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