Human capital acquisition as a signaling device in promotion competition

Chen Cohen, Ori Zax

Research output: Contribution to journalArticlepeer-review

Abstract

We analyze an economy in which workers compete over promotion to one of a fixed number of high-paying jobs. Hence, the probability of obtaining a promotion to such a job is a function of the worker's own ability and level of schooling as well as her/his rival's. In such an economy, a new reason for acquiring human capital emerges, obtaining an edge over potential rivals for desirable jobs. We discuss the implications of this new incentive to acquire human capital and show that low-ability workers overinvest while high-ability workers underinvest in schooling.

Original languageEnglish
Pages (from-to)550-566
Number of pages17
JournalMetroeconomica
Volume73
Issue number2
DOIs
StatePublished - 1 May 2022

Keywords

  • human capital
  • promotions
  • slot constraint

ASJC Scopus subject areas

  • Economics and Econometrics

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