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Hope, Noise, and the Efficiency of Perfect Meritocracy

Author

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  • Beltrametti, Luca

    (University of Genova)

  • Cardullo, Gabriele

    (University of Genova)

Abstract

This paper explores the economic effects of imperfect meritocracy in recruitment and career advancement. We compare two career promotion mechanisms: a fully meritocratic system and a "noisy" one, that allows less productive workers to advance. Our model shows that imperfect meritocracy in promotions can boost worker effort through the "hope effect," potentially leading to higher aggregate output and total welfare compared to a strictly meritocratic system. Less skilled workers benefit most under this scenario, while the high skilled are worse off. We conclude that when perfect meritocracy in recruitment is unattainable, it may not be optimal to enforce it in career advancement, offering insights for economic policy.

Suggested Citation

  • Beltrametti, Luca & Cardullo, Gabriele, 2024. "Hope, Noise, and the Efficiency of Perfect Meritocracy," IZA Discussion Papers 17532, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp17532
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    References listed on IDEAS

    as
    1. Carvalho, Jean-Paul, 2022. "Markets and communities: the social cost of the meritocracy," Journal of Institutional Economics, Cambridge University Press, vol. 18(3), pages 501-519, June.
    2. James Konow, 2000. "Fair Shares: Accountability and Cognitive Dissonance in Allocation Decisions," American Economic Review, American Economic Association, vol. 90(4), pages 1072-1091, September.
    3. Dawei Fang & Thomas Noe, 2022. "Less Competition, More Meritocracy?," Journal of Labor Economics, University of Chicago Press, vol. 40(3), pages 669-701.
    4. Morgan, John & Tumlinson, Justin & Várdy, Felix, 2022. "The limits of meritocracy," Journal of Economic Theory, Elsevier, vol. 201(C).
    5. Fong, Christina, 2001. "Social preferences, self-interest, and the demand for redistribution," Journal of Public Economics, Elsevier, vol. 82(2), pages 225-246, November.
    6. Robert H. Frank, 2016. "Success and Luck: Good Fortune and the Myth of Meritocracy," Economics Books, Princeton University Press, edition 1, number 10663, December.
    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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