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Internal promotion competitions in firms
Author(s) -
DeVaro Jed
Publication year - 2006
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.1756-2171.2006.tb00029.x
Subject(s) - promotion (chess) , tournament , sample (material) , wage , metropolitan area , labour economics , set (abstract data type) , business , microeconomics , economics , demographic economics , computer science , mathematics , medicine , chemistry , chromatography , combinatorics , pathology , politics , political science , law , programming language
Using a sample of skilled workers from a cross section of establishments in four metropolitan areas of the United States, I present evidence suggesting that promotions are determined by relative worker performance. I then estimate a structural model of promotion tournaments (treating as endogenous promotions, worker performance, and the wage spread from promotion) that simultaneously accounts for worker and firm behavior and how the interaction of these behaviors gives rise to promotions. The results are consistent with the predictions of tournament theory that employers set wage spreads to induce optimal performance levels, and that workers are motivated by larger spreads.