Prestige, Promotion, and Pay

58 Pages Posted: 26 Dec 2017 Last revised: 30 Jun 2020

See all articles by Daniel Ferreira

Daniel Ferreira

London School of Economics - Department of Finance; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Radoslawa Nikolowa

Queen Mary, University of London

Date Written: June 29, 2020

Abstract

We develop a theory in which financial (and other professional services) firms design career structures to “sell” prestigious jobs to qualified candidates. Firms create inefficient entry-level jobs, whose only function is to serve as currency for employees to pay for the right to compete for the prestigious jobs. In optimal structures, entry-level employees (“associates”) compete for better paid and more prestigious positions (“managing directors” or “partners”). Our model shows how the span of control is affected by prestige, productivity, and competition. The model provides new implications relating job prestige to compensation, employment, inequality, and the size of the financial sector.

Keywords: Job Prestige, Span of Control, Professional Careers, Financial Services Firms

Suggested Citation

Ferreira, Daniel and Nikolowa, Radoslawa, Prestige, Promotion, and Pay (June 29, 2020). Available at SSRN: https://ssrn.com/abstract=3091006 or http://dx.doi.org/10.2139/ssrn.3091006

Daniel Ferreira (Contact Author)

London School of Economics - Department of Finance ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
(+44) 20 7955 7544 (Phone)

HOME PAGE: http://personal.lse.ac.uk/FERREIRD/

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Radoslawa Nikolowa

Queen Mary, University of London ( email )

Lincoln's Inn Fields
Mile End Rd.
London, E1 4NS
United Kingdom

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