The impact of hierarchies on wages (original) (raw)
Related papers
Economics of Education Review, 1985
This paper investigates the relationship between schooling, experience, hierarchy and earnings, using sample data drawn from one of the largest companies in the Indian private sector. A recursive path approach is posited and an analysis of the results indicates that hierarchic status acts as an intervening variable to channel the transmission effect of schooling and experience onto earnings. After controlling for differences in schooling, hierarchic status is shown to rise monotonically, albeit by diminishing increments, with experience, thereby offering support for the marginal productivity theory. In the process, the weak version of the screening hypothesis is also borne out.
Hierarchies in organisations and labour market competition
Labour Economics, 2004
This paper studies the endogenous determination of hierarchies in firms. Firms can design a hierarchy with a continuum of ranks, one for each ability level. Nevertheless, in the market equilibrium, they choose to have only a finite number of ranks, so that in each rank there are workers of different abilities, who produce different output, and receive the same wage. It is also shown that an increase in the extent of labour market competition reduces the number of ranks in the hierarchy.
Wage differentials across firms: an application of multilevel modelling
Journal of Applied Econometrics, 2000
Multilevel modelling techniques are applied to a dataset that matches firms and workers, to pinpoint and explain contrasts among company wage policies. Results indicate that wage differences across firms are statistically significant, affecting every parameter of the pay policy (returns to schooling, tenure, experience, the penalty imposed on newly hired workers and on women). Gross labour productivity, average schooling in
Organizational power: should remuneration heterogeneity mirror hierarchy?
Review of Economic Design, 2016
We model and experimentally investigate effort levels in team production as a public good game with heterogeneous remuneration. In a hierarchically organized firm, team leaders (allocator) determine the effort levels of all team members. When the allocator receives equal payment or twice as much as the other workers, this results in the same team production, but when the allocator receives only half of what the other workers receive, team production is diminished.
Rent Seeking in Hierarchical Firms
2002
Hierarchical firms are enterprises with rigid internal job ladders. We examine the state enterprise as the prototypical hierarchical firm. In the state enterprise, promotion of employees through the internal hierarchy is determined by the workers' allocation of time between rent seeking and productive activity. Our model shows that given the incentive structure of the state enterprise we tend to see less productive and more adept rent seekers at senior management positions in such firms. Moreover, as we move up the firm's hierarchy, a decline in the productivity levels of the workers will be observed.
A theory of Careers in Hierarchical Internal Labor Markets
The paper develops a model that explains a broad pattern of evidence on careers in multilevel organizations. It shows how job mobility inside firms depends on changes in the size of the organization. Promotion rates rise (fall) during a corporate expansion (contraction). Economic conditions therefore affect individual career mobility and earnings profiles. The model analyzes how the interaction between human capital accumulation and learning impacts on the assignment of workers to jobs at different levels of authority in the corporate hierarchy. The model makes predictions about the timing of the provision of formal training.
Enriching a theory of wage and promotion dynamics inside firms
2003
In previous work we showed that a model that integrates job assignment, human-capital acquisition, and learning can explain several empirical findings concerning wage and promotion dynamics inside firms. In this paper we extend that model in two ways. First, we incorporate schooling into the model and derive a number of testable implications that we then compare with the available empirical evidence. Second, and more important, we show that introducing "task-specific" human capital allows us to produce cohort effects (i.e., the finding that a cohort that enters a firm at a low wage will continue to earn below-average wages years later). We argue that task-specific human capital is a realistic concept and may have many important implications. We also discuss limitations of our (extended) approach.