Promotion Signals, Age and Education
This paper examines whether more informative job promotions carry larger wage increases. In job assignment models with asymmetric information, unexpected promotions send a signal to the external labor market to revise upward their assessment of a workerâ€™s ability. The employing firm must then increase wages to prevent the worker from being bid away. Less educated workers are assumed to come from a group with lower average ability. Their promotion is hypothesized to signal a larger positive assessment of their ability than for more highly educated workers for whom promotion is expected. Promotions for younger workers, with less known about their abilities, should also result in strong signaling effects. We find results in accordance with our hypotheses regarding the effect of both age and education on the gains to promotion. However, the statistical significance of the estimates hinges on the promotion definition. Younger workers receive statistically significantly higher wage increases upon promotion only when promotion is defined by the attainment of managerial responsibilities not previously held. Less educated workers obtain statistically significantly larger wage increases upon promotion at a weak level of significance (10%) across definitions of promotion but at a high level of significance (5%) only when the subjective definition of promotion is used. We interpret the sensitivity to the definition of promotion to suggest that promotions may be heterogeneous in the information they reveal about the employee in way that depends on the characteristics of the employee.
|Date of creation:||Nov 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Ritter Annex 877, Philadelphia, PA 19122|
Web page: http://www.cla.temple.edu/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gibbs, Michael, 1995. "Incentive compensation in a corporate hierarchy," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 247-277, April.
- Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
- Robert Gibbons & Michael Waldman, 1999. "A Theory of Wage and Promotion Dynamics Inside Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1321-1358.
- Michael R. Pergamit & Jonathan R. Veum, 1999. "What is a Promotion?," ILR Review, Cornell University, ILR School, vol. 52(4), pages 581-601, July.
- Christian Belzil & Michael Bognanno, 2004.
"The Promotion Dynamics of American Executives,"
0404, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
- Christian Belzil & Michael Bognanno, 2004. "The Promotion Dynamics of American Executives," CIRANO Working Papers 2004s-05, CIRANO.
- Christian Belzil & Michael Bognanno, 2004. "The Promotion Dynamics of American Executives," Post-Print halshs-00180126, HAL.
- Belzil, Christian & Bognanno, Michael L., 2004. "The Promotion Dynamics of American Executives," IZA Discussion Papers 1003, Institute for the Study of Labor (IZA).
- Francesconi, Marco, 2001. " Determinants and Consequences of Promotions in Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(3), pages 279-310, July.
- Michael Waldman, 1984.
"Job Assignments, Signalling, and Efficiency,"
RAND Journal of Economics,
The RAND Corporation, vol. 15(2), pages 255-267, Summer.
- DeVaro, Jed & Waldman, Michael, 2006.
"The signaling role of promotions: Further theory and empirical evidence,"
1550, University Library of Munich, Germany.
- 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.
- George Baker & Michael Gibbs & Bengt Holmstrom, 1994. "The Internal Economics of the Firm: Evidence from Personnel Data," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 881-919.
- McCue, Kristin, 1996. "Promotions and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 14(2), pages 175-209, April.
- Sattinger, Michael, 1975. "Comparative Advantage and the Distributions of Earnings and Abilities," Econometrica, Econometric Society, vol. 43(3), pages 455-68, May.
- Uta SchÃ¶nberg, 2007. "Testing for Asymmetric Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 651-691.
- Milton Harris & Bengt Holmstrom, 1982. "A Theory of Wage Dynamics," Review of Economic Studies, Oxford University Press, vol. 49(3), pages 315-333.
- Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
- Dan Bernhardt, 1995. "Strategic Promotion and Compensation," Review of Economic Studies, Oxford University Press, vol. 62(2), pages 315-339.
- Joshua C. Pinkston, 2009.
"A Model of Asymmetric Employer Learning with Testable Implications,"
Review of Economic Studies,
Oxford University Press, vol. 76(1), pages 367-394.
- Joshua C. Pinkston, 2006. "A Model of Asymmetric Employer Learning With Testable Implications," Working Papers 390, U.S. Bureau of Labor Statistics.
- Riley, John G, 1979. "Testing the Educational Screening Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S227-52, October.
When requesting a correction, please mention this item's handle: RePEc:tem:wpaper:1205. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dimitrios Diamantaras)
If references are entirely missing, you can add them using this form.