Promotions, Demotions, Halo Effects and Earnings Dynamics of American Executives

Christian Belzil and Michael Bognanno

No 1630, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper explores the dynamics of wage growth in corporate hierarchies. Using panel data techniques, we estimate the causal effect of current and past transitions in reporting level and past earnings growth on components of current earnings and earnings growth using a large panel of US executives. After conditioning on unobserved heterogeneity, current compensation growth is positively correlated with past promotion outcomes but negatively correlated with past compensation growth. In a flexible model of wage growth, there is an important asymmetry between the effect of a promotion and a demotion. The effect of promotion is smaller in magnitude than the effect of a demotion. The causal effect of a promotion is positive on both growth in base pay and total cash compensation but is negative on bonus growth. The effect of a demotion is negative on growth in all pay components.

Keywords: earnings growth; promotions; halo effects; hierarchies; internal labor markets (search for similar items in EconPapers)
JEL-codes: C33 J41 M5 M51 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2005-06
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (1)

Published - published in: Journal of Labor Economics, 2008, 26 (2), 287-310

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Related works:
Journal Article: Promotions, Demotions, Halo Effects, and the Earnings Dynamics of American Executives (2008)
Working Paper: Promotions, Demotions, Halo Effects, and the Earnings Dynamics of American Executives (2008)
Working Paper: Promotions, Demotions, Halo Effects and the Earnings Dynamics of American executives (2008)
Working Paper: Promotions, Demotions, Halo Effects and Earnings Dynamics of American Executives (2006)
Working Paper: Promotions, Demotions, Halo Effects and Earnings Dynamics of American Executives (2006)
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