Job Prestige and Span of Control in Professional Service Firms

41 Pages Posted: 26 Dec 2017 Last revised: 6 Jun 2019

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 4, 2019

Abstract

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

Suggested Citation

Ferreira, Daniel and Nikolowa, Radoslawa, Job Prestige and Span of Control in Professional Service Firms (June 4, 2019). 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 ECARES ULB CP 114
B-1050 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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