Rat Races and Glass Ceilings- Career Paths in Organizations
In an ongoing organization, such as a large law partnership, employees are motivated not only by current rewards but also by the prospect of promotion, and the opportunity to influence policy and make rules in the future. This leads to a dynamic programming problem in contract design. We model career design in such a firm as a recursive mechanism design problem in an overlapping generations environment. Agents entering the firm may differ in their private characteristics which affect their costs of effort. We find that under recursive structure, a profit-maximizing principal offers, and promotion-motivated agents accept, "rat-race" contracts with very low wages and high effort levels. With wages driven down to zero, promotions become the main instrument to discriminate among agents in an adverse selection environment. The optimal adverse selection contract introduces a promotion barrier, or a "glass ceiling", for the high cost agents. We thus find that the issues of inefficiently high work levels (the "rat-race") and of unequal promotion rates (the "glass ceiling") are intimately interconnected. We apply this framework to equal opportunity and gender discrimination in employment
|Date of creation:||2001|
|Contact details of provider:|| Postal: 2424 Maile Way, Honolulu, HI 96822|
Web page: http://www.economics.hawaii.edu/
More information through EDIRC
|Order Information:|| Web: http://www.economics.hawaii.edu/research/working.html Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stoughton, Neal M & Talmor, Eli, 1999. "Managerial Bargaining Power in the Determination of Compensation Contracts and Corporate Investment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 69-93, February.
- O'Flaherty, Brendan & Siow, Aloysius, 1995.
"Up-or-Out Rules in the Market for Lawyers,"
Journal of Labor Economics,
University of Chicago Press, vol. 13(4), pages 709-735, October.
- O'Flaherty, B. & Siow, A., 1990. "Up or Out Rules in the Market for Lawers," University of Chicago - Economics Research Center 90-10, Chicago - Economics Research Center.
- Beckmann, Martin J., 1984. "Hierarchy vs. partnership," Journal of Economic Behavior & Organization, Elsevier, vol. 5(2), pages 237-245, June.
- James Albrecht & Anders Bjorklund & Susan Vroman, 2003. "Is There a Glass Ceiling in Sweden?," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 145-177, January.
- Albrecht, James & Björklund, Anders & Vroman, Susan, 2001. "Is There a Glass Ceiling in Sweden?," IZA Discussion Papers 282, Institute for the Study of Labor (IZA).
- Carr, Jack & Mathewson, Frank, 1990. "The Economics of Law Firms: A Study in the Legal Organization of the Firm," Journal of Law and Economics, University of Chicago Press, vol. 33(2), pages 307-330, October.
- Francine D. Blau & Lawrence M. Kahn, 2000. "Gender Differences in Pay," NBER Working Papers 7732, National Bureau of Economic Research, Inc.
- Jacques Cremer, 1986. "Cooperation in Ongoing Organizations," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 33-49.
- Sicherman, Nachum & Galor, Oded, 1990. "A Theory of Career Mobility," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 169-192, February.
- Oded Galor & Nachum Sicherman, 1988. "A Theory of Career Mobility," University of Chicago - George G. Stigler Center for Study of Economy and State 51, Chicago - Center for Study of Economy and State.
- Stephen J. Spurr, 1990. "Sex Discrimination in the Legal Profession: A Study of Promotion," ILR Review, Cornell University, ILR School, vol. 43(4), pages 406-417, July.
- Feinberg, Robert M, 1994. "Paralegals and Associate Lawyers: Substitutability within the Law Firm, 1977-87," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 367-372, May.
- Wood, Robert G & Corcoran, Mary E & Courant, Paul N, 1993. "Pay Differences among the Highly Paid: The Male-Female Earnings Gap in Lawyers' Salaries," Journal of Labor Economics, University of Chicago Press, vol. 11(3), pages 417-441, July.
- Bardsley, P., 2001. "Recursive Contracts," Department of Economics - Working Papers Series 797, The University of Melbourne.
- 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 329-348, June. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:hai:wpaper:200106. 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: (Web Technician)
If references are entirely missing, you can add them using this form.