Career Concerns in a Simple Experimental Labour Market

Bernd Irlenbusch and Dirk Sliwka
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Bernd Irlenbusch: University of Erfurt

No 855, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We experimentally investigate a simple version of Holmström’s career concerns model in which firms compete for agents in two consecutive periods. Profits of firms are determined by agents’ unknown ability and the effort they choose. Before making second-period wage offers firms are informed about first-period profits. In a different treatment firms additionally learn the abilities of agents. Theory suggests high first-period equilibrium effort in the hidden ability treatment but no effort elsewhere. However, we find that effort is significantly higher in the revealed ability treatment and therefore conclude that transparency does not weaken, but strengthen career concerns incentives.

Keywords: incentives; labour market; reputation; reciprocity; career concerns (search for similar items in EconPapers)
JEL-codes: C72 C91 J33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-lab
Date: 2003-08
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Journal Article: Career concerns in a simple experimental labour market (2006)
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