Career Concerns with Coarse Information

Alessandro Bonatti and Johannes Horner (johannes.horner@yale.edu)
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Johannes Horner: Cowles Foundation, Yale University

No 1831, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper develops a model of career concerns. The worker's skill is revealed through output, wage is based on expected output, and so on assessed ability. Specifically, effort increases the probability that a skilled worker achieves a one-time breakthrough. Effort levels at different times are strategic substitutes. Equilibrium effort (and, if marginal cost is convex, wage) is single-peaked with seniority. The agent works too little, too late. Both delay and underprovision of effort worsen if effort is observable. If the firm commits to wages but faces competition, the optimal contract features piecewise constant wages as well as severance pay.

Keywords: Career concerns; Experimentation; Career paths; Up-or-out; Reputation (search for similar items in EconPapers)
JEL-codes: D82 D83 M52 (search for similar items in EconPapers)
Pages: 93 pages
Date: 2011-10, Revised 2012-01
New Economics Papers: this item is included in nep-cta, nep-hrm, nep-lab and nep-mic
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Working Paper: Career Concerns with Coarse Information (2012)
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