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Careers and Wage Growth within Large Firms

  • Lima, Francisco

    ()

    (Universidade Nova de Lisboa)

  • Pereira, Pedro T.

    ()

    (University of Madeira)

The relationship between the worker’s career path and wage growth is studied using a longitudinal sample of large firms. The econometric analysis shows that promoted workers receive a positive wage premium even if they stay in the same job level. Demotions are associated with negative wage premiums. The wage-career dynamics generates a U-shape to the wage premiums for promotions over the hierarchical ladder. In the context of the model discussed, this shape suggests a stronger learning and/or human capital accumulation effect at the bottom of the hierarchy and a stronger job assignment effect at the top.

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File URL: http://ftp.iza.org/dp336.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 336.

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Length: 51 pages
Date of creation: Jul 2001
Date of revision:
Publication status: published in: International Journal of Manpower, 2003, 7 (24), 812-835
Handle: RePEc:iza:izadps:dp336
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  1. Dan Bernhardt & David Scoones, 1991. "Promotion: Turnover and Preemptive Wage Offers," Working Papers 817, Queen's University, Department of Economics.
  2. Abowd, J.M. & Kramarz, F. & Margolis, D.N., 1995. "High-Wage Workers and High-Wage Firms," Cahiers de recherche 9503, Universite de Montreal, Departement de sciences economiques.
  3. Sattinger, Michael, 1975. "Comparative Advantage and the Distributions of Earnings and Abilities," Econometrica, Econometric Society, vol. 43(3), pages 455-68, May.
  4. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-15, September.
  5. 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.
  6. Henry S. Farber & Robert Gibbons, 1994. "Learning and Wage Dynamics," Working Papers 707, Princeton University, Department of Economics, Industrial Relations Section..
  7. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  8. Manove, Michael, 1997. "Job Responsibility, Pay and Promotion," Economic Journal, Royal Economic Society, vol. 107(440), pages 85-103, January.
  9. Paul R. Milgrom, 1984. "Job Discrimination, Market Forces and the Invisibility Hypothesis," Cowles Foundation Discussion Papers 708R, Cowles Foundation for Research in Economics, Yale University, revised 1985.
  10. McCue, Kristin, 1996. "Promotions and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 14(2), pages 175-209, April.
  11. Eriksson, Tor, 1999. "Executive Compensation and Tournament Theory: Empirical Tests on Danish Data," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 262-80, April.
  12. Ricart i Costa, Joan E, 1988. "Managerial Task Assignment and Promotions," Econometrica, Econometric Society, vol. 56(2), pages 449-66, March.
  13. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  14. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  15. Michael R. Pergamit & Jonathan R. Veum, 1999. "What is a promotion?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 52(4), pages 581-601, July.
  16. Edward P. Lazear, 1999. "Personnel Economics: Past Lessons and Future Directions," NBER Working Papers 6957, National Bureau of Economic Research, Inc.
  17. Robert Gibbons, 1996. "Incentives and Careers in Organizations," NBER Working Papers 5705, National Bureau of Economic Research, Inc.
  18. Kahn, Charles & Huberman, Gur, 1988. "Two-sided Uncertainty and "Up-or-Out" Contracts," Journal of Labor Economics, University of Chicago Press, vol. 6(4), pages 423-44, October.
  19. Pierre-Andre Chiappori & Bernard Salanie & Julie Valentin, 1999. "Early Starters versus Late Beginners," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 731-760, August.
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