Standard promotion practices versus up‐or‐out contracts

Suman Ghosh and Michael Waldman

RAND Journal of Economics, 2010, vol. 41, issue 2, 301-325

Abstract: This article develops a theory concerning the choice between standard promotion practices and up‐or‐out contracts. Our theory is based on asymmetric learning and promotion incentives. We find that firms employ up‐or‐out contracts when firm‐specific human capital is low and standard promotion practices when it is high. We also find that, if commitment to a wage floor is feasible and effort provision is important, up‐or‐out is employed when low‐ and high‐level jobs are similar. These results are consistent with many of the settings in which up‐or‐out is typically observed, such as law firms and academia.

Date: 2010
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Citations: View citations in EconPapers (67)

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https://doi.org/10.1111/j.1756-2171.2010.00101.x

Related works:
Working Paper: Standard Promotion Practices Versus Up-Or-Out Contracts (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:randje:v:41:y:2010:i:2:p:301-325

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