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Career Concerns in a Simple Experimental Labour Market

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  • Irlenbusch, Bernd

    () (University of Cologne)

  • Sliwka, Dirk

    () (University of Cologne)

Abstract

We experimentally investigate a simple version of Holmström’s career concerns model in which firms compete for agents in two consecutive periods. Profits of firms are determined by agents’ unknown ability and the effort they choose. Before making second-period wage offers firms are informed about first-period profits. In a different treatment firms additionally learn the abilities of agents. Theory suggests high first-period equilibrium effort in the hidden ability treatment but no effort elsewhere. However, we find that effort is significantly higher in the revealed ability treatment and therefore conclude that transparency does not weaken, but strengthen career concerns incentives.

Suggested Citation

  • Irlenbusch, Bernd & Sliwka, Dirk, 2003. "Career Concerns in a Simple Experimental Labour Market," IZA Discussion Papers 855, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp855
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    References listed on IDEAS

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    1. repec:eee:labeco:v:51:y:2018:i:c:p:294-306 is not listed on IDEAS
    2. Bernd Irlenbusch, 2006. "Experimental perspectives on incentives in organisations," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 14(1), pages 1-24, February.
    3. Brandes, Leif & Franck, Egon, 2012. "Social preferences or personal career concerns? Field evidence on positive and negative reciprocity in the workplace," Journal of Economic Psychology, Elsevier, vol. 33(5), pages 925-939.
    4. Elena Katok & Enno Siemsen, 2011. "Why Genius Leads to Adversity: Experimental Evidence on the Reputational Effects of Task Difficulty Choices," Management Science, INFORMS, vol. 57(6), pages 1042-1054, June.
    5. Frederiksen, Anders, 2013. "Incentives and earnings growth," Journal of Economic Behavior & Organization, Elsevier, vol. 85(C), pages 97-107.
    6. Alexander K. Koch & Albrecht Morgenstern & Philippe Raab, 2004. "An experimental test of career concerns," Royal Holloway, University of London: Discussion Papers in Economics 04/31, Department of Economics, Royal Holloway University of London, revised Nov 2004.
    7. Koch, Alexander K. & Morgenstern, Albrecht & Raab, Philippe, 2009. "Career concerns incentives: An experimental test," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 571-588, October.
    8. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, Elsevier.
    9. Gürtler, Marc & Gürtler, Oliver, 2014. "The interaction of explicit and implicit contracts: A signaling approach," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 135-146.
    10. Hong, Fuhai & Hossain, Tanjim & List, John A., 2015. "Framing manipulations in contests: A natural field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 118(C), pages 372-382.
    11. Andreas Roider & Andrea Voskort, 2015. "Reputational Herding in Financial Markets: A Laboratory Experiment," CESifo Working Paper Series 5162, CESifo Group Munich.
    12. Koch, Alexander K. & Morgenstern, Albrecht & Raab, Philippe, 2004. "An Experimental Test of Career Concerns," IZA Discussion Papers 1405, Institute for the Study of Labor (IZA).
    13. Alexander K. Koch & Albrecht Morgenstern & Philippe Raab, 2009. "Career concerns incentives: An experimental test," Post-Print hal-00693820, HAL.
    14. Frederiksen, Anders, 2010. "Earnings Progression, Human Capital and Incentives: Theory and Evidence," IZA Discussion Papers 4863, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    career concerns; reciprocity; reputation; labour market; incentives;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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