CFDP 1831

Career Concerns with Coarse Information

Author(s): 

Publication Date: October 2011

Revision Date: January 2012

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.

Keywords: 

Career concerns, Experimentation, Career paths, Up-or-out, Reputation

JEL Classification Codes: D82, D83, M52