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Short Run and Long Run Dynamics in an Empirical model of promotion” IZA Working Paper

By Christian Belzil, Centre National, Recherche Scientifique and Michael Bognanno


We formulate an empirical model of promotion with dynamic selfselection where the current promotion probability depends on the initial level in the firm, individual specific attributes (age, schooling and tenure), unobserved (to the econometrician) individual attributes, time varying firm specific variables(firm size and profits)aswellasendogenouspast promotion histories. We distinguish the effects of recent past promotion outcomes (short run dynamics) from the effects of promotion speed which is measured as the average number of promotion transitions achieved per year of potential experience (long run dynamics). The model is fit onan 8 year panel of promotion histories of 30,000 American executives employed in more than 380 different firms. We find that individual specific endowments (age, tenure and schooling) account for a larger share of individual variations in promotion histories than do variations in firm size (employment) and profits, although the difference in explanatory power may be relatively small. While schooling raises promotion opportunities, its effect decreases with time. We find that workers are non-randomly matched across firms and, in particular, that those who have higher unobserved abilities and motivation are matched with more profitable firms. Recent promotions seem to reduce promotion opportunities within a short period (especially up to 2 years) but, unlike what is sometimes postulated in the theoretical literature, we find no evidence of “fast track ” promotion We thank Edward Lazear, Bart Hamilton and Thierry Magnac, for helpful discussions a

Year: 2003
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