Promotion, Turnover, and Preemptive Wage Offers

Dan Bernhardt, David Scoones

Research output: Contribution to journalArticlepeer-review

Abstract

This paper examines the strategic promotion and wage decisions of employers when employees may be more valuable to competing firms. Competing employers must incur a cost to learn the quality of their match with a manager. Promotion signals that workers are potentially valuable managers in other firms and so can lead to turnover. To preempt competition for a manager, an employer may offer a wage high enough to discourage competitors from acquiring information and bidding up the wage further or hiring the worker away. This transfers wages from good workers to bad. More costly information acquisition yields greater expected lifetime wages.
Original languageEnglish (US)
Pages (from-to)771-791
Number of pages21
JournalThe American Economic Review
Volume83
Issue number4
StatePublished - 1993
Externally publishedYes

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