Things Can Only Get Worse? An Empirical Examination of the Peter Principle
University of Aberdeen - Business School
University of Aberdeen - Health Economics Research Unit
University of Aberdeen
University of Aberdeen Business School Working Paper No. 2006-05
The results reported in this paper suggest the possible operation of the Peter Principle in a large hierarchical financial sector firm. This result holds even after we allow for variation in optimal effort over stages in the hierarchy. The method also allows us to attribute the contributory factors for the observed fall in performance after a promotion. It appears that approximately 2/3 of the fall is due to the Peter Principle and 1/3 due to lessening incentives.
Keywords: Tournaments, Peter Principle
JEL Classification: J41working papers series
Date posted: January 15, 2008
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