Career Concerns in a Simple Experimental Labour Market

31 Pages Posted: 17 Sep 2003

See all articles by Bernd Irlenbusch

Bernd Irlenbusch

London School of Economics & Political Science - Department of Management; IZA Institute of Labor Economics

Dirk Sliwka

University of Cologne - Department of Business Administration and Human Resource Management; IZA Institute of Labor Economics

Date Written: September 2003

Abstract

We experimentally investigate a simple version of Holmstroem's career concerns model in which firms compete for agents in two consecutive periods. Profits of firms are determined by agents' unknown ability and the effort they choose. Before making second-period wage offers firms are informed about first-period profits. In a different treatment firms additionally learn the abilities of agents. Theory suggests high first-period equilibrium effort in the hidden ability treatment but no effort elsewhere. However, we find that effort is significantly higher in the revealed ability treatment and therefore conclude that transparency does not weaken, but strengthen career concerns incentives.

Keywords: incentives, labour market, reputation, reciprocity, career concerns

JEL Classification: C72, C91, J33

Suggested Citation

Irlenbusch, Bernd and Sliwka, Dirk, Career Concerns in a Simple Experimental Labour Market (September 2003). IZA Discussion Paper No. 855. Available at SSRN: https://ssrn.com/abstract=445641

Bernd Irlenbusch

London School of Economics & Political Science - Department of Management ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 (0)20 7955 7840 (Phone)
+44 (0)20 7955 6887 (Fax)

HOME PAGE: http://www.lse.ac.uk/collections/management/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Dirk Sliwka (Contact Author)

University of Cologne - Department of Business Administration and Human Resource Management ( email )

Koln, 50923
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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