Skill Profiles, Observability and Firm Hierarchies: A Theory of Promotion and Compensation

Dan Bernhardt ()

Working Papers from Queen's University, Department of Economics

Abstract: Within a hierarchical firm structure, the paper details how the composition of a worker's skills and the (non) observability of a worker's ability affect wage and promotion paths. Promotion takes place over time and is not efficient, as employers seek to exploit their inside information about a worker's ability. Employers are led to promote educated employees before their equally or more able, but uneducated, counterparts. The relationship between pay and performance at a given job grade is ambiguous. Explanations for fast track promotion plans, the lack of demotion for poor managers, and other empirical regularities are provided.

Keywords: trade policy; protectionism; industry; economic equilibrium (search for similar items in EconPapers)
Date: Written
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Persistent link: http://EconPapers.repec.org/RePEc:qed:wpaper:764

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