Dissertation/Thesis Abstract

Essays on Careers, Incentives and Learning in an Internal Labor Market
by Li, Dan, Ph.D., Northwestern University, 2012, 132; 3508528
Abstract (Summary)

In this thesis I study careers, incentive instruments and learning in an internal labor market using personnel data from a Chinese state-owned firm from 1998-2008.

In the first chapter, I document workers' careers and compensation in this organization, compared with the stylized facts documented in Baker, Gibbs and Holmstrom (1994a) using a US firm, and with key predictions derived from different theories. The major empirical patterns shown by the Chinese firm are consistent with those of its US counterparts. I then use this dataset to test two specific questions in chapters two and three.

The second chapter studies the relationship between incentive instruments used by the Chinese firm. In a hierarchical corporation, two sets of instruments are widely used to provide workers with incentives to exert effort: incentive pay and promotion. Do firms trade off using one instrument for the other, as theory predicts? My study provides evidence that, controlling for performance, a smaller bonus is given to those with a better future promotion opportunity. Such a trade-off is greater for low-tenured workers. At the same time, bonus to performance sensitivity is smaller for them. I also discuss how the level of substitution between the two incentive instruments differs by job type.

In the third chapter, I provide evidence of learning within the organization. Peers' evaluation of an employee's ability is more consistent if the employee stays in the evaluation pool longer. This is particularly true for professional skills and problem solving skills, but not significant for teamwork, creativity and learning ability. I also find easily observable characteristics, particularly years of education, to be correlated with rate of learning. Peers' beliefs about well-educated individuals' problem solving skills are more consistent over time.

Indexing (document details)
Advisor: Jones, Benjamin, Li, Jin
Commitee: Brown, Jennifer, Hochberg, Yael
School: Northwestern University
Department: Managerial Economics and Strategy
School Location: United States -- Illinois
Source: DAI-A 73/09(E), Dissertation Abstracts International
Subjects: Economics, Labor economics
Keywords: Career, Hierarchy, Incentives, Internal labor market, Learning
Publication Number: 3508528
ISBN: 978-1-267-34258-4
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