IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpla/0501010.html
   My bibliography  Save this paper

Why Are Promotions Less Likely in Nonprofit Firms?

Author

Listed:
  • Jed DeVaro

    (Cornell University)

  • Dana Samuelson

    (Cornell University)

Abstract

We use data from the Multi-City Study of Urban Inequality (MCSUI) employer survey to document a new empirical finding that workers are less likely to receive promotions in nonprofit firms than in for-profit firms. We propose an incentives-based explanation for this result and offer empirical evidence that is consistent with our hypothesis. At the heart of our explanation is a tradeoff between the incentive-provision and job-assignment roles of promotions. While for-profit firms must rely on promotions to serve both purposes, presumably achieving neither perfectly, we argue that nonprofits have the luxury of using promotions predominantly to achieve optimal job assignment. We conjecture that incentive creation may be less of a concern in nonprofit firms, where workers self-select and are often intrinsically motivated by interest in the firm’s output, thus allowing promotions to be used mainly to achieve efficient job assignments.

Suggested Citation

  • Jed DeVaro & Dana Samuelson, 2005. "Why Are Promotions Less Likely in Nonprofit Firms?," Labor and Demography 0501010, EconWPA.
  • Handle: RePEc:wpa:wuwpla:0501010
    Note: Type of Document - doc; pages: 45
    as

    Download full text from publisher

    File URL: http://econwpa.repec.org/eps/lab/papers/0501/0501010.pdf
    Download Restriction: no

    File URL: http://econwpa.repec.org/eps/lab/papers/0501/0501010.ps.gz
    Download Restriction: no

    File URL: http://econwpa.repec.org/eps/lab/papers/0501/0501010.doc.gz
    Download Restriction: no

    References listed on IDEAS

    as
    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Dan Bernhardt, 1995. "Strategic Promotion and Compensation," Review of Economic Studies, Oxford University Press, vol. 62(2), pages 315-339.
    3. Baker, George P & Jensen, Michael C & Murphy, Kevin J, 1988. " Compensation and Incentives: Practice vs. Theory," Journal of Finance, American Finance Association, vol. 43(3), pages 593-616, July.
    4. Jed DeVaro, 2006. "Internal promotion competitions in firms," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 521-542, September.
    5. Preston, Anne E, 1988. "The Effects of Property Rights on Labor Costs of Nonprofit Firms: An Application to the Day Care Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 337-350, March.
    6. Paul Milgrom & Sharon Oster, 1987. "Job Discrimination, Market Forces, and the Invisibility Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 102(3), pages 453-476.
    7. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
    8. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-715, September.
    9. H. Naci Mocan & Erdal Tekin, 2003. "Nonprofit Sector and Part-Time Work: An Analysis of Employer-Employee Matched Data on Child Care Workers," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 38-50, February.
    10. Preston, Anne E, 1989. "The Nonprofit Worker in a For-Profit World," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 438-463, October.
    11. Weisbrod, Burton A, 1983. "Nonprofit and Proprietary Sector Behavior: Wage Differentials among Lawyers," Journal of Labor Economics, University of Chicago Press, vol. 1(3), pages 246-263, July.
    12. 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.
    13. David Easley & Maureen O'Hara, 1983. "The Economic Role of the Nonprofit Firm," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 531-538, Autumn.
    14. Daniel Immergluck, 1996. "What employers want: Job prospects for less-educated workers," The Review of Black Political Economy, Springer;National Economic Association, vol. 24(4), pages 135-143, June.
    15. McCue, Kristin, 1996. "Promotions and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 14(2), pages 175-209, April.
    16. Gibbons, Robert & Waldman, Michael, 1999. "Careers in organizations: Theory and evidence," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 36, pages 2373-2437 Elsevier.
    17. Goddeeris, John H, 1988. "Compensating Differentials and Self-selection: An Application to Lawyers," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 411-428, April.
    18. Holtmann, A G, 1983. "A Theory of Non-Profit Firms," Economica, London School of Economics and Political Science, vol. 50(200), pages 439-449, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Patrick Francois, 2007. "Making a difference," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 714-732, September.

    More about this item

    JEL classification:

    • J - Labor and Demographic Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpla:0501010. 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: (EconWPA). General contact details of provider: http://econwpa.repec.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.