Hope, Noise, and the Efficiency of Perfect Meritocracy

Luca Beltrametti () and Gabriele Cardullo ()
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Luca Beltrametti: University of Genova
Gabriele Cardullo: University of Genova

No 17532, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper explores the economic effects of imperfect meritocracy in recruitment and career advancement. We compare two career promotion mechanisms: a fully meritocratic system and a "noisy" one, that allows less productive workers to advance. Our model shows that imperfect meritocracy in promotions can boost worker effort through the "hope effect," potentially leading to higher aggregate output and total welfare compared to a strictly meritocratic system. Less skilled workers benefit most under this scenario, while the high skilled are worse off. We conclude that when perfect meritocracy in recruitment is unattainable, it may not be optimal to enforce it in career advancement, offering insights for economic policy.

Keywords: meritocracy; efficiency; recruitment; career advancement (search for similar items in EconPapers)
JEL-codes: A13 D61 D63 J20 M51 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2024-12
New Economics Papers: this item is included in nep-lma and nep-mic
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