Job Prestige and Span of Control in Professional Service Firms
41 Pages Posted: 26 Dec 2017 Last revised: 6 Jun 2019
Date Written: June 4, 2019
We develop a theory of career paths in professional service firms. In our model, firms optimally design their career paths to “sell” scarce prestigious jobs to a set of qualified candidates. We show that optimal career paths resemble promotion-to-partner structures in which entry-level employees (“associates”) compete for a limited number of better paid and more prestigious positions (“partners”). Our model shows how the optimal span of control (i.e., the associate-to-partner ratio) is affected by a number of factors, such as job prestige, job productivity, labor market competition, and product market competition. The model also provides a number of new empirical implications relating job prestige to wage dynamics, employment, and inequality within and between generations.
Keywords: Job Prestige, Span of Control, Professional Careers, Law Firms
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