Title

Career Concerns with Coarse Information

Document Type

Discussion Paper

Publication Date

10-1-2011

CFDP Number

1831

CFDP Revision Date

2012-01-01

CFDP Pages

93

Abstract

This paper develops a model of career concerns. The worker’s skill is revealed through output, wage is based on expected output, and so on assessed ability. Specifically, effort increases the probability that a skilled worker achieves a one-time breakthrough. Effort levels at different times are strategic substitutes. Equilibrium effort (and, if marginal cost is convex, wage) is single-peaked with seniority. The agent works too little, too late. Both delay and underprovision of effort worsen if effort is observable. If the firm commits to wages but faces competition, the optimal contract features piecewise constant wages as well as severance pay.

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