Threat of Dismissal: Incentive or Sorting?

Posted: 1 Feb 2010

Date Written: 2005

Abstract

Many people are fired from their jobs for poor performance. However, it is difficult to distinguish whether they are fired because they are not well suited for their job (sorting explanation) or because the firms are trying to provide incentives for effort (incentive explanation). This article develops a dynamic incentive model of dismissal and proposes a methodology to distinguish between these two explanations. The methodology is based on learning-by-doing and changes in the slope of dismissal probability with respect to tenure. Using personnel data from a large U.S. company, this study finds significant evidence for the incentive explanation.

Suggested Citation

Kwon, Illoong, Threat of Dismissal: Incentive or Sorting? (2005). Journal of Labor Economics, Vol. 23, No. 4, 2005. Available at SSRN: https://ssrn.com/abstract=1545809

Illoong Kwon (Contact Author)

Seoul National University ( email )

Graduate School of Public Administration
599 Gwanak-ro
Gwanak-gu, Seoul 151-742
Korea, Republic of (South Korea)
82-2-880-8551 (Phone)
82-2-877-2411 (Fax)

HOME PAGE: http://www.albany.edu/~ik325357/

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