The Hidden Effect of Meritocratic Promotion Procedure: Experimental Evidence

Emilien Prost and Gaye Del Lo

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: The aim of this experimental paper is to show how the willingness of an employee to accept inequality of wages between him and his executive will depend on the ability on which the executive is evaluated when he is promoted. This willingness to accept inequality is captured by the minimum wage enough to incentivize to work for his executive. We show that selecting an executive on his ability to outperform his employee at his own task will be counterproductive to make employee accepting inequality of wages. We argue that the efficiency of “merit-based” promotion procedure may be challenged by this result.

Keywords: Legitimacy; leadership; tournament; contract theory; moral hazard; personnel economics. (search for similar items in EconPapers)
JEL-codes: D00 D86 J50 M50 M51 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-hpe, nep-hrm and nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2019-21

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