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The Signalling Role of Promotion in Japan


  • Kazuaki Okamura

    () (Department of Economics and Social Sciences, Faculty of Humanities and Economics, Kochi University)


Under asymmetric information conditions regarding worker productivity between current and prospective employers, a worker's promotion signals his/her productivity. In this Paper, we tested the signalling role of promotion, using Japanese micro-level data. We found that among lower-level positions, promotion seems to signal a worker's ability, and both the business cycle and foreign-capital ratio of his/her company significantly strengthen this effects. These results suggest that external labour market conditions (i.e. asymmetric information regarding a worker's abilities between a current and prospective employer) affect the economic differences among workers in the internal labour market.

Suggested Citation

  • Kazuaki Okamura, 2011. "The Signalling Role of Promotion in Japan," Discussion Papers 1112, Graduate School of Economics, Kobe University.
  • Handle: RePEc:koe:wpaper:1112

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    References listed on IDEAS

    1. Bas Klaauw & António Dias da Silva, 2011. "Wage dynamics and promotions inside and between firms," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(4), pages 1513-1548, October.
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    3. Dan Bernhardt, 1995. "Strategic Promotion and Compensation," Review of Economic Studies, Oxford University Press, vol. 62(2), pages 315-339.
    4. Belzil, Christian & Bognanno, Michael L., 2004. "The Promotion Dynamics of American Executives," IZA Discussion Papers 1003, Institute for the Study of Labor (IZA).
    5. Pablo Acosta, 2004. "Promotions, State Dependence and Intrafirm Job Mobility: Evidence From Personnel Records," Econometric Society 2004 North American Summer Meetings 585, Econometric Society.
    6. Francine Blau & Jed DeVaro, 2006. "New Evidence on Gender Differences in Promotion Rates: An Empirical Analysis of a Sample of New Hires," Working Papers 891, Princeton University, Department of Economics, Industrial Relations Section..
    7. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
    8. Henry S. Farber & Robert Gibbons, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1007-1047.
    9. Prendergast, Canice, 1992. "Career development and specific human capital collection," Journal of the Japanese and International Economies, Elsevier, vol. 6(3), pages 207-227, September.
    10. Ishida, Junichiro, 2004. "Signaling and strategically delayed promotion," Labour Economics, Elsevier, vol. 11(6), pages 687-700, December.
    11. Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning and Statistical Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 313-350.
    12. Jed DeVaro & Michael Waldman, 2012. "The Signaling Role of Promotions: Further Theory and Empirical Evidence," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 91-147.
    13. Ariga,Kenn & Brunello,Giorgio & Ohkusa,Yasushi, 2010. "Internal Labour Markets in Japan," Cambridge Books, Cambridge University Press, number 9780521142748, March.
    14. McCue, Kristin, 1996. "Promotions and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 14(2), pages 175-209, April.
    15. Ricart i Costa, Joan E, 1988. "Managerial Task Assignment and Promotions," Econometrica, Econometric Society, vol. 56(2), pages 449-466, March.
    16. Booth, Alison L. & Francesconi, Marco & Frank, Jeff, 2003. "A sticky floors model of promotion, pay, and gender," European Economic Review, Elsevier, vol. 47(2), pages 295-322, April.
    17. Uta Schönberg, 2007. "Testing for Asymmetric Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 651-691.
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    Cited by:

    1. Michael Waldman & Ori Zax, 2016. "An Exploration of the Promotion Signaling Distortion," Journal of Law, Economics, and Organization, Oxford University Press, vol. 32(1), pages 119-149.
    2. Cassidy, Hugh & DeVaro, Jed & Kauhanen, Antti, 2016. "Promotion signaling, gender, and turnover: New theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 126(PA), pages 140-166.

    More about this item


    Strategically delayed promotion; Signalling; Wage growth; Japan.;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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