Promotions, Demotions, Halo Effects and Earnings Dynamics of American Executives

Christian Belzil () and Michael L. Bognanno

No 606, Working Papers from Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure

Abstract: This paper explores the dynamics of wage growth in corporate hierarchies. Using panel data techniques, we estimate the causal effect of current and past transitions in reporting level and past earnings growth on components of current earnings and earnings growth using a large panel of US executives. After conditioning on unobserved heterogeneity, current compensation growth is positively correlated with past promotion outcomes but negatively correlated with past compensation growth. In a flexible model of wage growth, there is an important asymmetry between the effect of a promotion and a demotion. The effect of promotion is smaller in magnitude than the effect of a demotion. The causal effect of a promotion is positive on both growth in base pay and total cash compensation but is negative on bonus growth. The effect of a demotion is negative on growth in all pay components.

Keywords: earning growth; promotion; reputation (search for similar items in EconPapers)
JEL-codes: C33 J41 M5 M51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec
Date: Written
View list of references

Downloads: (external link)
ftp://ftp.gate.cnrs.fr/RePEc/2006/0606.pdf (application/pdf)

Related works:
Working Paper: Promotions, Demotions, Halo Effects and Earnings Dynamics of American Executives (2006)
Working Paper: Promotions, Demotions, Halo Effects and Earnings Dynamics of American Executives (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:gat:wpaper:0606

Access Statistics for this paper

More papers in Working Papers from Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure
Contact information at EDIRC.
Series data maintained by Nelly Wirth ().