The Signaling Role of Not Being Promoted: Theory and Evidence

Jin, Xin (2014): The Signaling Role of Not Being Promoted: Theory and Evidence.

Abstract

This article studies the negative signals associated with non-promotion. I first show theoretically that, when workers’ productivity rises little with additional years on the same job level, the negative signal associated with non-promotion leads to wage decreases. On the other hand, when additional job-level tenure leads to a sizable increase in productivity, workers’ wages increase. I test my model’s predictions using the personnel records from a large US firm from 1970-1988. I find a clear hump-shaped wage-job-tenure profile for workers who stay in the same job level, which supports my model’s prediction.

• Item Type: MPRA Paper
• Language: English
• Keywords: Asymmetric information, human capital accumulation, signaling, promotion, wages
• Subjects: J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M5 - Personnel Economics > M51 - Firm Employment Decisions ; Promotions

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