Optimal Promotions of Competing Firms in a Frictional Labour Market with Organizational Hierarchies

Anna Zaharieva, Herbert Dawid and Mariya Mitkova

VfS Annual Conference 2021 (Virtual Conference): Climate Economics from Verein für Socialpolitik / German Economic Association

Abstract: We study optimal promotion decisions of hierarchical firms, with one junior and one senior managerial position, which interact in a search and matching labour market. Workers acquire experience over time while being employed in a junior position and the firm has to determine the experience level at which the worker receives a promotion which allows her to fill a senior position. Promoted workers move to the senior position in their current firm, if it is vacant, otherwise they search for senior positions on the market. The promotion cutoffs of the competing firms exhibit strategic complementarity, but we show that generically a unique stable symmetric general equilibrium exists. If workers have homogeneous skills, then an increase in the skill level induces faster promotion. In the presence of two skill levels in the work force an increase of the fraction of high skilled leads to slower promotion of both types of workers, where the promotion threshold for high skilled workers is substantially below that for low skilled workers. This implies earlier promotions of high skill workers compared to the low skilled consistent with available empirical evidence. Finally, we show that a larger number of competitors in the market leads to earlier promotions. This finding extends to low skill workers in the market with skill heterogeneity. But the impact of competition on the promotions of high skill workers is non-monotone.

Keywords: promotions; theory of the firm; search and matching labour market; organizational hierarchies; job-to-job mobility (search for similar items in EconPapers)
JEL-codes: C63 D21 J63 J64 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/242337/1/vfs-2021-pid-48418.pdf (application/pdf)

Related works:
Journal Article: Optimal promotions of competing firms in a frictional labour market with organizational hierarchies (2023)
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:zbw:vfsc21:242337

Access Statistics for this paper

More papers in VfS Annual Conference 2021 (Virtual Conference): Climate Economics from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().