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Career Concerns in a Simple Experimental Labour Market

  • Irlenbusch, Bernd

    ()

    (University of Cologne)

  • Sliwka, Dirk

    ()

    (University of Cologne)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 855.

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Length: 31 pages
Date of creation: Aug 2003
Date of revision:
Publication status: published in: European Economic Review, 2006, 50 (1), 147-170
Handle: RePEc:iza:izadps:dp855
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