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Career Concerns and the Acquisition of Firm-Specific Skills

  • Bernard Sinclair-Desgagné
  • Olivier Cadot

This paper studies compensation schemes that can motivate a worker to acquire nonverifiable firm-specific skills, when the acquisition process is also one of learning about managerial talent. At the beginning of the employment relationship, the worker encounters opportunities to enhance her specific human capital. Greater skills may increase the chances of being promoted; but as more opportunities are taken, more is learned about the worker's talent, and someone displaying low talent is sure not to be promoted. In this context we show that first-best firm-specific skills collection can be implemented with a scheme that combines discretionary promotions, an appropriate wage schedule and subsidies of training at the margin. ZUSAMMENFASSUNG - (Karrierepläne und der Erwerb von unternehmensspezifischen Fähigkeiten) In diesem Beitrag werden Entlohnungssysteme untersucht, die einen Beschäftigten dazu motivieren können nichtverifizierbare unternehmensspezifische Fähigkeiten zu erwerben, wenn es sich darum handelt, in diesem Prozeß auch Managementfähigkeiten zu erlernen. Zu Beginn der Beschäftigung sieht sich der Beschäftigte Möglichkeiten gegenübergestellt, sein spezifisches Humankapital zu vergrößern. Bessere Fähigkeiten können die Wahrscheinlichkeit für eine Beförderung erhöhen. Je mehr Gelegenheiten er wahrnimmt, desto besser wird auch das Talent des Beschäftigten erkannt. Bei geringem Talent wird auch deutlich, daß keine Beförderung ansteht. In diesem Zusammenhang wird gezeigt, daß der erstbeste unternehmensspezifische Fähigkeitserwerb mit einem Entlohnungsschema umgesetzt werden kann, das Beförderungen mit Ermessensspielraum bei einem angemessenem Gehalt und ein Fortbildungsförderungssystem "am Rand" verbindet.

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Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 97-19.

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Length: 21 pages
Date of creation: Sep 1997
Date of revision:
Publication status: Published in the Journal of Japanese and International Economics , Vol. 14(3), September 2000, pp. 204-217.
Handle: RePEc:wzb:wzebiv:fsiv97-19
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  1. Holmstrom, Bengt & Ricart i Costa, Joan, 1986. "Managerial Incentives and Capital Management," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 835-60, November.
  2. Hashimoto, Masanori, 1981. "Firm-Specific Human Capital as a Shared Investment," American Economic Review, American Economic Association, vol. 71(3), pages 475-82, June.
  3. Robert Gibbons, 1996. "Incentives and Careers in Organizations," NBER Working Papers 5705, National Bureau of Economic Research, Inc.
  4. Demougin, Dominique & Siow, Aloysius, 1994. "Careers in Ongoing Hierarchies," American Economic Review, American Economic Association, vol. 84(5), pages 1261-77, December.
  5. Gibbons, Robert & Murphy, Kevin J, 1992. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 468-505, June.
  6. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-85, July.
  7. Jaggia, Priscilla Butt & Thakor, Anjan V, 1994. "Firm-Specific Human Capital and Optimal Capital Structure," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 283-308, May.
  8. Carmichael, H Lorne, 1983. "The Agent-Agents Problem: Payment by Relative Output," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 50-65, January.
  9. Hermalin, Benjamin E. & Katz, Michael L., 1990. "Moral Hazard and Verifiability: The Effects of Renegotiation in Agency," Department of Economics, Working Paper Series qt1678w3w9, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  10. Kahn, Charles & Huberman, Gur, 1988. "Two-sided Uncertainty and "Up-or-Out" Contracts," Journal of Labor Economics, University of Chicago Press, vol. 6(4), pages 423-44, October.
  11. Lorne Carmichael, 1983. "Firm-Specific Human Capital and Promotion Ladders," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 251-258, Spring.
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