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The Signaling Role of Not Being Promoted: Theory and Evidence

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  • Xin Jin

    (Department of Economics, University of South Florida)

Abstract

This article studies the negative signals associated with non-promotion. I first show theoretically that, when workers’ productivity rises little with additional years on the same job level, the negative signal associated with non-promotion leads to wage decreases. On the other hand, when additional job-level tenure leads to a sizable increase in productivity, workers’ wages increase. I test my model’s predictions using the personnel records from a large US firm from 1970-1988. I find a clear hump-shaped wage-job-tenure profile for workers who stay in the same job level, which supports my model’s prediction.

Suggested Citation

  • Xin Jin, 2014. "The Signaling Role of Not Being Promoted: Theory and Evidence," Working Papers 0314, University of South Florida, Department of Economics.
  • Handle: RePEc:usf:wpaper:0314
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    More about this item

    Keywords

    Asymmetric Information; Human Capital Accumulation; Signaling; Promotion; Wages;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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