Wage Structure and the Incentive Effect of Promotions

Kyklos, Vol. 53, No. 3, 2006, pp. 441-459

Tinbergen Institute Discussion Paper No. TI 04-107/3

39 Pages Posted: 27 Sep 2004 Last revised: 4 Nov 2014

See all articles by Marco van Herpen

Marco van Herpen

Boston Consulting Group

Kees Cools

Boston Consulting Group

Mirjam van Praag

University of Amsterdam - Department of Economics; Copenhagen Business School; Tinbergen Institute; IZA Institute of Labor Economics

Date Written: May 1, 2004

Abstract

This paper studies wage structure characteristics and their consequent incentive effects empirically. Based on personnel records and an employee survey, we provide evidence that wages are attached to jobs and that promotions play a dominant role as a wage determinant. Our findings indicate furthermore that a promotion affects both intrinsic and extrinsic motivation significantly, though in two different ways: an expected promotion increases extrinsic motivation whereas intrinsic motivation is highest subsequent to a realized promotion. The relationship between extrinsic motivation and expected promotions implies that promotions have a clear incentive effect, consistent with a key - not yet tested - assumption of the tournament model.

Keywords: Promotions, incentives, tournament model, internal labor market, extrinsic motivation, intrinsic motivation

JEL Classification: J41, J33, M51, M52

Suggested Citation

van Herpen, Marco and Cools, Kees and van Praag, Mirjam, Wage Structure and the Incentive Effect of Promotions (May 1, 2004). Kyklos, Vol. 53, No. 3, 2006, pp. 441-459; Tinbergen Institute Discussion Paper No. TI 04-107/3. Available at SSRN: https://ssrn.com/abstract=595361 or http://dx.doi.org/10.2139/ssrn.595361

Marco Van Herpen (Contact Author)

Boston Consulting Group ( email )

J.F. Kennedylaan 100
3741 EH Baarn
Netherlands

Kees Cools

Boston Consulting Group ( email )

J.F. Kennedylaan 100
3741 EH Baarn
Netherlands
+ 31 35 54 868 00 (Phone)

Mirjam Van Praag

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4096 (Phone)
+31 20 525 4182 (Fax)

Copenhagen Business School ( email )

Kilevej 14A
Frederiksberg, 2000
Denmark

Tinbergen Institute

Gustav Mahlerlaan
Amsterdam
Netherlands

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
366
Abstract Views
2,672
rank
79,298
PlumX Metrics