Up-or-Out Rules in the Market for Lawyers

Brendan O'Flaherty and Aloysius Siow ()

Journal of Labor Economics, 1995, vol. 13, issue 4, 709-35

Abstract: The authors examine how up-or-out rules operate as a screening device in the market for lawyers. Using data on large New York law firms, they show that firm growth is a slow and uncertain process because performance as an associate is not an especially informative signal about whether a lawyer will make a good partner and because the costs of mistaken promotion are relatively high. A newly hired associate is unlikely to be a suitable partner and the screening process is relatively imprecise. Firm growth therefore contributes between 5-7 percent of the present value of profits of a law firm. Copyright 1995 by University of Chicago Press.

Date: 1995
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Working Paper: Up or Out Rules in the Market for Lawers (1990)
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