Frédéric Loss
University Paris-Dauphine, PSL Research University



(Monday, 22nd May 2017)

Title : Promotions and Career Concerns

Download the presentation - 326.07 KB

The literature on career concerns has long studied how building a reputation in the labour market provides economic agents with implicit incentives to exert effort. Two clear cut (and well known) results are obtained. First of all, (implicit) incentives decline as beliefs about ability become more precise. Second, (implicit) incentives decline as output is less accurate measure of ability.

A more recent literature, which takes into account the possibility for an agent to be promoted, challenges these results. This allows for instance to explain the casual observation that agents work hard to overwhelm the potential adverse consequences of hazards they are confronted with when the issue at stake is important (contrarily to what predict the second clear cut result).

In this presentation, we will present the traditional clear cuts results of the career concerns literature as well as the new ones. Moreover, we will also show how these new results impact on the risk-taking behaviour of economic agents (e.g., managers) and on firms organization.

Bibliographical references :

Must read reference : Miklos-Thal, J., and H. Ullrich, 2014, Belief Precision and Effort Incentives in Promotion Contests, Economic Journal, 125, 1952--1963.

Holmström, B., 1999. Managerial Incentive Problem: A Dynamic Perspective, Review of Economic Studies, LXVI, 169-82.

Dewatripont, M., I. Jewitt, and J. Tirole, 1999. The Economics of Career Concerns, Part I: Comparing Information Structures, Review of Economic Studies, LXVI, 183- 198.