Career Concerns with Coarse Information
94 Pages Posted: 29 Oct 2011 Last revised: 26 Jan 2012
Date Written: January 26, 2012
This paper develops a model of career concerns. The worker’s skill is revealed through output, wage is based on expected output, and so on assessed ability. Specifically, effort increases the probability that a skilled worker achieves a one-time breakthrough. Effort levels at different times are strategic substitutes. Equilibrium effort (and, if marginal cost is convex, wage) is single-peaked with seniority. The agent works too little, too late. Both delay and underprovision of effort worsen if effort is observable. If the firm commits to wages but faces competition, the optimal contract features piecewise constant wages as well as severance pay.
Keywords: Career concerns, Experimentation, Career paths, Up-or-out, Reputation
JEL Classification: D82, D83, M52
Suggested Citation: Suggested Citation