Promotions, Demotions, Halo Effects and Earnings Dynamics of American Executives
This paper explores the dynamics of wage growth in corporate hierarchies. Using panel data techniques, we estimate the causal effect of current and past transitions in reporting level and past earnings growth on components of current earnings and earnings growth using a large panel of US executives. After conditioning on unobserved heterogeneity, current compensation growth is positively correlated with past promotion outcomes but negatively correlated with past compensation growth. In a flexible model of wage growth, there is an important asymmetry between the effect of a promotion and a demotion. The effect of promotion is smaller in magnitude than the effect of a demotion. The causal effect of a promotion is positive on both growth in base pay and total cash compensation but is negative on bonus growth. The effect of a demotion is negative on growth in all pay components.
|Date of creation:||Jun 2005|
|Date of revision:|
|Publication status:||published in: Journal of Labor Economics, 2008, 26 (2), 287-310|
|Contact details of provider:|| Postal: |
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
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.:
- McCue, Kristin, 1996. "Promotions and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 14(2), pages 175-209, April.
- John Haltiwanger & Marilyn E. Manser & Robert Topel, 1998. "Labor Statistics Measurement Issues," NBER Books, National Bureau of Economic Research, Inc, number halt98-1, 07.
- repec:cup:cbooks:9780521589819 is not listed on IDEAS
- Thomas J. Dohmen & Ben Kriechel & Gerard A. Pfann, 2004.
"Monkey bars and ladders: The importance of lateral and vertical job mobility in internal labor market careers,"
Journal of Population Economics,
Springer, vol. 17(2), pages 193-228, 06.
- Dohmen, Thomas & Kriechel, Ben & Pfann, Gerard A., 2003. "Monkey Bars and Ladders: The Importance of Lateral and Vertical Job Mobility in Internal Labor Market Careers," IZA Discussion Papers 867, Institute for the Study of Labor (IZA).
- Calvo, Guillermo A & Wellisz, Stanislaw, 1979. "Hierarchy, Ability, and Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 991-1010, October.
- Fairburn, J.A. & Malcomson, J.M., 1995.
"Performance, Promotion, and the Peter Principle,"
UFAE and IAE Working Papers
304.95, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Canice Prendergast, 1998. "What Happens within Firms? A Survey of Empirical Evidence on Compensation Policies," NBER Chapters, in: Labor Statistics Measurement Issues, pages 329-356 National Bureau of Economic Research, Inc.
- Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Internal Economics of the Firm: Evidence from Personnel Data," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 881-919, November.
- Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
- Christian Belzil & Michael Bognanno, 2004.
"The Promotion Dynamics of American Executives,"
- Christian Belzil & Michael Bognanno, 2004. "The Promotion Dynamics of American Executives," Working Papers 0404, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
- Christian Belzil & Michael Bognanno, 2004. "The Promotion Dynamics of American Executives," CIRANO Working Papers 2004s-05, CIRANO.
- Belzil, Christian & Bognanno, Michael L., 2004. "The Promotion Dynamics of American Executives," IZA Discussion Papers 1003, Institute for the Study of Labor (IZA).
- repec:cup:cbooks:9780521589826 is not listed on IDEAS
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Sherwin Rosen, 1985.
"Prizes and Incentives in Elimination Tournaments,"
NBER Working Papers
1668, National Bureau of Economic Research, Inc.
- Bognanno, Michael L, 2001. "Corporate Tournaments," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 290-315, April.
- Edward P. Lazear, 1999. "Personnel Economics: Past Lessons and Future Directions," NBER Working Papers 6957, National Bureau of Economic Research, Inc.
- Jonathan S. Leonard, 1990. "Executive pay and firm performance," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 13-29, February.
- Michael Gibbs & Wallace Hendricks, 2004.
"Do Formal Salary Systems Really Matter?,"
Cornell University, ILR School, vol. 58(1), pages 71-93, October.
- repec:cup:cbooks:9780521589833 is not listed on IDEAS
- Robert Gibbons, 1996. "Incentives and Careers in Organizations," NBER Working Papers 5705, National Bureau of Economic Research, Inc.
- Gibbs, Michael, 1995. "Incentive compensation in a corporate hierarchy," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 247-277, April.
- Robert Gibbons & Michael Waldman, 1999. "A Theory Of Wage And Promotion Dynamics Inside Firms," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1321-1358, November.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp1630. 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: (Mark Fallak)
If references are entirely missing, you can add them using this form.