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Title Promotion and Work Incentive for a Future Job
Author Sangwon Park (Hankuk University of Foreign Studies)
Volume 32 Number 2
Keywords Promotion, Career Concerns, Moral Hazard
Abstract We presented a simple model in which agents could determine effort level with the
prospect of promotion. Even without any increase of payment or fringe benefits, promotion
could provide an incentive for hard work because it could be a signal of ones ability and the
possibility of a better job offer in ones future career. Outside firms that cannot observe the
agents current performance use promotion status in order to predict the agents ability. We
point out that some of the results of the standard career concerns model do not hold here.
Because promotion is a binary decision, extra effort becomes effective only when the
promotion has not been made without it. This shows that the dispersion of an agents ability
and noise as well as well-known signal-to-noise ratio play important roles in promotion.
File KER-20161231-32-2-02.pdf
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