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Promotion Policies at Different Firms

Ori Zax ()

Economics Bulletin, 2017, vol. 37, issue 2, 1045-1054

Abstract: A large body of research shows that in an economy characterized by asymmetric learning, promoting a worker serves as a signal of his ability. In the present paper, we show that the signals generated by promotion by two firms differ if those firms have different production functions since those firms promote workers of different abilities. Hence, if the production function differs across sectors then workers have different wages following a promotion, different probabilities of being promoted and different wages prior to the promotion stage in each sector. These differences do not arise in an economy without asymmetric information.

Keywords: Promotions; job ladders; inter-industry wage differentials. (search for similar items in EconPapers)
JEL-codes: M5 J3 (search for similar items in EconPapers)
Date: 2017-05-06
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