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On the Incentive Effect of Job Rotation

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  • Katolnik, Svetlana
  • Hakenes, Hendrik

Abstract

The longer an agent is employed in a job, the more the principal will have learned about his ability through the history of performance. With implicit incentives, influence perceptions and effort incentives decrease over time. Rotating agents to a different job deletes learning effects about ability, creating fresh impetus for effort. However, job rotation also reduces the time horizon, and thus reduces rents from working and also incentives. In this trade-off, we derive conditions for the desirability of job rotation and show how in the presence of career concerns job rotation may emerge endogenously. Finally, our model allows for more general comments on the optimal rotation frequency as well as the preferred organizational design of a firm.

Suggested Citation

  • Katolnik, Svetlana & Hakenes, Hendrik, 2014. "On the Incentive Effect of Job Rotation," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100574, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc14:100574
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    References listed on IDEAS

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    1. Maury Gittleman & Michael Horrigan & Mary Joyce, 1998. "“Flexible†Workplace Practices: Evidence from a Nationally Representative Survey," ILR Review, Cornell University, ILR School, vol. 52(1), pages 99-115, October.
    2. Arijit Mukherjee & Luis Vasconcelos, 2011. "Optimal job design in the presence of implicit contracts," RAND Journal of Economics, RAND Corporation, vol. 42(1), pages 44-69, March.
    3. Arijit Mukherjee, 2008. "Career Concerns, Matching, And Optimal Disclosure Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1211-1250, November.
    4. Susan N. Houseman, 2001. "Why Employers Use Flexible Staffing Arrangements: Evidence from an Establishment Survey," ILR Review, Cornell University, ILR School, vol. 55(1), pages 149-170, October.
    5. Tor Eriksson & Jaime Ortega, 2006. "The Adoption of Job Rotation: Testing the Theories," ILR Review, Cornell University, ILR School, vol. 59(4), pages 653-666, July.
    6. Alexander K. Koch & Eloïc Peyrache, 2011. "Aligning Ambition and Incentives," Journal of Law, Economics, and Organization, Oxford University Press, vol. 27(3), pages 655-688.
    7. Metin M. Cosgel & Thomas J. Miceli, 1999. "Job Rotation: Cost, Benefits, and Stylized Facts," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(2), pages 301-301, June.
    8. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    9. Eguchi, Kyota, 2005. "Job transfer and influence activities," Journal of Economic Behavior & Organization, Elsevier, vol. 56(2), pages 187-197, February.
    10. Maria Goltsman & Arijit Mukherjee, 2011. "Interim Performance Feedback in Multistage Tournaments: The Optimality of Partial Disclosure," Journal of Labor Economics, University of Chicago Press, vol. 29(2), pages 229-265.
    11. Jaime Ortega, 2001. "Job Rotation as a Learning Mechanism," Management Science, INFORMS, vol. 47(10), pages 1361-1370, October.
    12. Anil Arya, 2004. "Using Job Rotation to Extract Employee Information," Journal of Law, Economics, and Organization, Oxford University Press, vol. 20(2), pages 400-414, October.
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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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