Career and Non-Career Jobs: Dangling the Carrot

Andri Chassamboulli and Demetris Koursaros ()

University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics

Abstract: We develop a model of the labor market with career and non-career jobs. Workers in career jobs start at the low rank and can be promoted to a higher rank. Non-career jobs have the typical single-rank structure. We show that it is optimal for career firms to incentivize their employees through the option value of a promotion. By increasing the wage spread between low and top positions they can elicit more effort from the mass of the workers in low ranks, while rewarding handsomely only the very few that get promoted. We explore the macroeconomic implications of this hierarchical payment structure. We show how our model can provide interesting insights into various puzzles such as the wage gap between men and women, the cyclicality of the labor wedge and the low volatility of the real wage relative to hours and output along the business cycle, without imposing ad-hoc nominal wage rigidities.

Keywords: career-jobs; promotions; job hierarchy; labor wedge; gender wage gap (search for similar items in EconPapers)
JEL-codes: E24 J31 J33 J64 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2022-10-07
New Economics Papers: this item is included in nep-dge, nep-hrm and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://papers.econ.ucy.ac.cy/RePEc/papers/07-2022.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucy:cypeua:07-2022

Access Statistics for this paper

More papers in University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics
Bibliographic data for series maintained by ().