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Human capital acquisition as a competitive response to the promotion distortion
Author(s) -
Zax Ori
Publication year - 2020
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/meca.12286
Subject(s) - inefficiency , promotion (chess) , distortion (music) , human capital , economics , investment (military) , microeconomics , capital (architecture) , labour economics , market economy , computer science , political science , telecommunications , amplifier , archaeology , bandwidth (computing) , politics , law , history
Waldman shows that under the assumption that prospective employers observe whether a worker was promoted, but cannot observe his ability, the promotion policy is inefficient. In the current paper, we show that human capital acquisition made after the players (both worker and employer) observe the worker's ability reduces this inefficiency, even though such an investment is not optimal in some setups.