Promotion Determinants in Corporate Hierarchies: An Examination of Fast Tracks and Functional Area

This chapter estimates a dynamic reduced-form model of intra-firm promotions using an employer–employee panel of over 300 of the largest corporations in the United States in the period from 1981 to 1988. The estimation conditions on unobserved individual heterogeneity and allows for both an endogenous initial condition and sample attrition linked to individual heterogeneity in demonstrating the relative importance of variables that influence promotion. The role of the executive’s functional area in promotion is considered along with the existence and source of promotion fast tracks. We find that while the principal determinant of promotions is unobserved individual heterogeneity, functional area has a high explanatory power, resulting in promotion probabilities that differ by functional area for executives at the same reporting level and firm. No evidence is found that an executive’s recent speed of advancement in pay grade has a positive causal impact on in-sample promotions after conditioning on the executive’s career speed of advancement, except for the lowest level executives the data. Fast tracks appear to largely result from heterogeneity in persistent individual characteristics, not from an inherent benefit in recent advancement itself

The Optimality of Heterogeneous Tournaments

We investigate the effect of employee heterogeneity on the incentive to put forth effort in a market-based tournament. Employers use the tournament's outcome to estimate employees' abilities and accordingly condition their wage offers. Employees put forth effort, because by doing so they increase the probability of outperforming the rival, thereby increasing their ability assessment and thus the wage offer. We demonstrate that the tournament outcome provides more information about employees' abilities in case they are heterogeneous. Thus, employees get a higher incentive to affect the tournament outcome, and employers find it optimal to hire heterogeneous contestants

Self-Selection and Subjective-Well Being: Copula Models with an Application to Public and Private Sector Work

We discuss a new approach to specifying and estimating ordered probit models with endogenous switching, or with binary endogenous regressor, based on copula functions. These models provide a framework of analysis for self-selection in economic well-being equations, where assigment of regressors may be choice based, resulting from well-being maximization, rather than random. In an application to public and private sector job satisfaction, and using data on male workers from the German Socio-Economic Panel, we find that a model based on Frank's copula is preferred over two alternative models with independence and normal copula, respectively. The results suggest that public sector workers are negatively selected

Wage Effects of Recruitment Methods: The Case of the Italian Social Service Sector

This essay analyzes the role of different recruitment channels, and of informal networks in particular, on wage structures across various organization types in the Italian social service sector. While the impact of recruitment methods on wages has been addressed in several previous contributions, none of them focuses on social services. Comparison of outcomes across organization types within the same sector is in itself another novelty, as compared to previous studies that generally focus on differences across sectors or, more recently, across countries. The main findings are that nonprofit organizations prefer informal recruitment methods to better select the most motivated workers, namely those workers who share the nonprofit mission. Furthermore the impact of informal contacts on the wage structure explains much of the unobserved wage differentials across organization type. © 2009 Physica-Verlag Heidelberg

Design and Implementation of Pay for Performance

A large, mature and robust economic literature on pay for performance now exists, which provides a useful framework for thinking about pay for performance systems. I use the lessons of the literature to discuss how to design and implement pay for performance in practice

A Survey of Experimental Research on Contests, All-Pay Auctions and Tournaments

Many economic, political and social environments can be described as contests in which agents exert costly efforts while competing over the distribution of a scarce resource. These environments have been studied using Tullock contests, all-pay auctions and rankorder tournaments. This survey provides a review of experimental research on these three canonical contests. First, we review studies investigating the basic structure of contests, including the contest success function, number of players and prizes, spillovers and externalities, heterogeneity, and incomplete information. Second, we discuss dynamic contests and multi-battle contests. Then we review research on sabotage, feedback, bias, collusion, alliances, and contests between groups, as well as real-effort and field experiments. Finally, we discuss applications of contests to the study of legal systems, political competition, war, conflict avoidance, sales, and charities, and suggest directions for future research. (author's abstract

AN EMPIRICAL ANALYSIS OF RISK, INCENTIVES AND THE DELEGATION OF WORKER AUTHORITY

641-66

Modeling Discrete Choice with Uncertain Data: An Augmented MNL Estimator

This article introduces a multinomial logit model that uses ancillary information to control for uncertainty in both the observed choices made by respondents, and in the attributes of a respondent's choice set. Simulated data are used to compare the performance of this estimator versus simpler models, under several different kinds of uncertainty. Copyright 2005, Oxford University Press.