Promotion Rat Race and Public Policy

Geir Bjertnaes

No 3781, CESifo Working Paper Series from CESifo

Abstract: This study investigates whether excess effort to climb a career ladder justifies policy interventions. The answer depends on whether the government is able to levy a higher tax burden on career workers than on non-career workers. Both a tax on top income aimed at lowering the rewards of promotion and a labour law that restricts excess effort require such a differentiation in the tax burden to improve welfare. The differentiation in tax burden prevents that the welfare gain of reducing excess effort is neutralized by the welfare cost connected to an increase in the number of career workers.

Keywords: tournaments; promotions; status; taxation (search for similar items in EconPapers)
JEL-codes: H21 H23 J33 L22 (search for similar items in EconPapers)
Date: 2012
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